LGPS Central Limited is proud to be part of a new initiative exploring how investors can align their portfolios to the goals of the Paris Agreement.
The new initiative, launched by the Institutional Investors Group on Climate Change (IIGCC), aims to help develop a common understanding of the concepts relating to alignment with the Paris Agreement, and explore options for approaches and methods that can be used by investors who wish to align their portfolios to it.
Michael Marshall, Director of Responsible Investment & Engagement at LGPS Central Limited, said: “If implemented, the Paris Agreement will introduce risks and opportunities to institutional investors. Many investors have considered aligning their portfolios to the Paris climate accord, but unfortunately there is no agreed framework for what this means in practice. The IIGCC’s initiative is vital for asset owners to understand their portfolio’s impact on a changing climate, and the impact of a changing climate on their portfolios.”
Many pension funds and asset owners recognise climate change as one of the largest systemic risks in their investment portfolios.
An increasing number have made commitments to low carbon investment, and there is significant interest in determining how investors can support the objectives of the Paris Agreement.
The initiative will initially:
- Develop working definitions for key concepts and identify different approaches and methods relevant to the objectives of aligning portfolios to the Paris Agreement
- Explore the feasibility of these different approaches and methods for different asset classes and sectors
- Test the most promising approaches and methodologies for alignment using real world portfolios
- Explore feasibility and opportunities for aggregation of alignment approaches at the portfolio level
- Identify the financial characteristics of the portfolios and transition options in the context of wider financial risks
The initiative’s steering committee includes other leading European investors such as AP2, Brunel Pension Partnership, Church of England Pensions Board, PKA and TPT Retirement Solutions.