Partnerships between institutional investors are critical to achieving a low-carbon economy.
As institutional investors, we’ve a fiduciary duty to act in the perfect interests of our beneficiaries and to attain investment returns sufficient to fulfill their expectations. To achieve this, we must also be sure that there are stable financial, social and environmental systems on which we will construct these returns.
At University Pension Plan (UPP), we imagine that promoting healthy systems is an element of our fiduciary duty to our members. That’s why we have looked beyond our own portfolio as we develop our response to climate change and our net zero approach, knowing that emissions have to fall in the actual world and that a well-managed transition to a CO2 -poor economy requires systemic changes in all sectors of the worldwide economy.
The net-zero transition also offers institutional and other investors the chance to construct confidence, resilience and competitiveness within the broader economy by profitably financing activities that support sustainable solutions and lower emissions.
By contributing to collaborative initiatives with the worldwide investment community, investors create mutual relationships through which we will share expertise and best practices, leverage resources and increase our influence to create the change we’d like. In this fashion we will reduce uncertainty and risk and maximize our return potential.
Such collaboration between asset owners is probably the most powerful ways for organizations like ours to drive systemic change and fulfill our shared fiduciary duty.
Systemic risk requires collective motion
When investors reach out on to and set expectations for the businesses they own and the external managers they work with, we help put those corporations on the transition path, improving their resilience, and… Focus on reducing emissions. Investors also need corporations to enhance their climate-related disclosures to raised track their progress toward net zero targets and make more informed investment decisions.
Such finance-led groups like Climate protection 100+ and that Institutional Investor Group on Climate Change (IIGCC) We work to make sure sound science, alignment and consistency in all our members’ activities. By working with diverse corporations with high emissions and a set of shared goals, we work not only to alter their behavior, but in addition to enhance climate-related expectations and the structure of knowledge flow for all corporations and investors.
Collective advocacy to guard and increase value
By collectively advocating with policymakers and regulators, investors can promote rules and frameworks that support the interests of our beneficiaries and create the conditions for well-managed climate change. Investors can collaborate and amplify their voices through established industry initiatives reminiscent of Net-Zero Asset Owner Alliance (NZAOA) convened by the United Nationsa membership organization consisting of 85 institutional investors with assets under management (AUM) of greater than $11 trillion, and the Ceres Investor Network on climate risk and sustainabilitywhich collectively represents greater than 220 investors and over $60 trillion in assets under management.
Through our participation in political working groups, reminiscent of those organized by the Canadian Coalition for Good Governance and that Association for Responsible Investmentwe will define and promote good corporate governance practices in Canada and world wide. We also can influence public policy to enhance governance standards. Greater transparency, accountability and disclosure, in turn, help manage risks and protect the worth of investments.
Partnership in times of change makes the collective stronger
As national and international climate change regulations and incentive frameworks evolve, investors face latest legal and reputational risks, in addition to potential returns impacts. Rather than navigating this evolving landscape alone, they’ll join investor alliances and help coordinate policy advocacy, enable improved knowledge sharing, and mitigate old and latest risks.
In order, for instance, to counteract greenwashing and to offer investors with more and higher information to assist them make decisions, the International Sustainability Standards Board (ISSB) will introduce latest global accounting standards for measuring and reporting climate-related impacts in January 2024. Joint investor groups have contributed to the event of those latest standards and are able to support their global adoption. Again, it will be difficult for individual investors to maintain up with the rapid pace of change on this space or to develop the collective influence that a gaggle of investors can muster.
There are many opportunities to collaborate with like-minded investors in local markets or on the international stage. The global transition to a low-carbon economy will proceed to challenge all kinds of investors, bringing with it each risks and opportunities. Net zero won’t be achieved alone, but through collective motion across the financial world.
Together, through partnerships between institutional investors and investors of all sizes, we may help shape the long run of finance and deliver the systemic, global change needed to make net zero a reality.
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