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Building the Structure of Sustainable Investing

The acceptance of sustainable investing continues to grow among asset managers globally. 

Last summer the Institutional Investors Group on Climate Change (IIGCC) introduced the Net-Zero Investment Framework (NZIF) which laid out a blueprint “enabling investors to decarbonize investment portfolios and increase investment in climate solutions in a way consistent with and contributing to global net zero emissions by 2050 or sooner.” Over 100 institutional investors, representing $33 trillion in assets, were involved in crafting the Framework. Components of the Framework included objectives and targets, strategic asset allocation and asset class assignment, policy advocacy and investor engagement and governance.

To date, 35 institutions have put the Framework to use and five of these, including APG, Brunel, The Church of England Pensions Board, PKA, and the Phoenix Group, have just completed a test of its efficacy on real world portfolios. Research consultancy, Vivid Economics, (recently acquired by McKinsey) analyzed the test results and concluded that “The Framework provides a practical tool for alignment, and it is possible to deploy it using existing data and without compromising on performance.” 

Sustainable investing is becoming increasingly practical and economically feasible from a performance point of view. We expect that as sustainable investing approaches become more sophisticated and performance testing confirms positive expectations, the trend of leading institutional investors to mainstream sustainability in their investment processes will accelerate.