With the notion of Net Zero popularised by COP26, we are all turning our minds to how to achieve this state in practice – i.e. a world where we have completely negated the amount of greenhouse gases produced by human activity by reducing emissions and implementing methods of absorbing carbon dioxide from the atmosphere. Institutional investors like pension funds and insurers hold the key to achieving this goal through their choices of investments.
Many initiatives have been established in recent years and months to promote the transition to Net Zero investment portfolios. These include organisations promoting action, setting targets and measures, committing to disclosures, and providing tools.
Understanding and navigating these initiatives can be a challenge for anyone not working directly in this area. The IFoA’s Sustainability Board established the Net Zero Portfolio Alignment Working Group to create material to help actuaries understand this key area as well as to help them navigate the various initiatives and frameworks.
This includes explaining and comparing three of the main Net Zero investing frameworks:
- the Institutional Investors Group on Climate Change’s (IIGC) Paris Aligned Investing Initiative (PAII) Net Zero Investment Framework (NZIF),
- the Net Zero Asset Owners Alliance (NZAOA) Target Setting Protocol (TSP), and
- the Science Based Targets initiative (SBTi) Finance framework
The Working Group is producing a paper as well as an accompanying series of podcasts to engage actuaries in this important topic.
Hosted by Brandon Horwitz, co-chair of the IFoA Net Zero Portfolio Alignment Working Group, with special guests: Kerry Adams-Strump, Prudential plc’s Director of Group ESG and Roelof Coertze, Senior Manager, Actuarial Function Team at Prudential plc (and also the co-chair of the Actuaries’ Carbon Collaboration). In the podcast, guests explain their roles at Prudential plc and how they are involved in Net Zero investing, what framework they use (and why) as well as some of the challenges they have experienced in moving to this approach.