Institutional investors steer large portions of their investment portfolios via benchmarks. However, given that net-zero-aligned benchmarks (which can be applied in a broad range of cases) do not currently exist, net-zero asset owners are operating with an incomplete toolbox.
This is why the Net-Zero Asset Owner Alliance calls for “Development and Uptake of Net-Zero Aligned Benchmarks”.
To provide the basis and context for a discussion on best practices for constructing net-zero-aligned benchmarks and index universes, the Alliance sets out ten key principles. The ten principles cover, among others, avoiding mechanical exclusions of high-emitting sectors; including forward-looking indicators as key input; and incorporating metrics for a just transition.
Leveraging these principles would allow index providers to develop a critical tool that would support net-zero investors in implementing strategic asset allocation and would also translate their objectives to asset managers.