As the world transitions to a low-carbon future, institutional investors are increasingly motivated to contribute to greenhouse gas emissions reductions by starting to align their core portfolios with the financial requirements of the low-carbon economy; by starting to decarbonize their portfolios. Many investors recognize that the “climate friendliness” of their portfolios will affect their long-term success in a changing economy.
The final version of the report Climate Strategies and Metrics: Exploring Options for Institutional Investors is a useful guide for investors who wish to help facilitate low-carbon change. The report:

  • discusses investor activities for climate friendliness, such as seeking new, low-carbon investments and shifting existing carbon-intensive investments towards low-carbon solutions;
  • explains the importance of investor positioning and signaling for mobilizing a critical mass of investors and facilitating significant climate impact in the real economy; and
  • assesses the landscape of available metrics and their suitability for each strategy.

This report is the latest publication for the financial sector jointly produced by UNEP Finance Initiative, WRI, and the 2° Investing Initiative. It follows the August publication of the Carbon Asset Risk Discussion Framework, a guide to understanding non-physical climate-related risks to financial institutions. The framework counters several myths about this type of risk, helping finance professionals integrate a rational, accurate assessment of carbon asset risk into their decision-making in order to stay ahead of changing economic, political, and social factors.
The smoothest path forward in the low-carbon transition requires financial institutions to seek climate impacts and minimize carbon asset risk. However, investors should consider each of these objectives separately, as they require separate strategies.
The role of institutional investors in preventing the worst consequences of climate change will undoubtedly be discussed many times over the course of the COP21 climate negotiations in Paris. The two aforementioned publications can enable participants to have a productive discussion rooted in the realities that financial institutions are bound to face.

Published: 2015 | by: UNEPFI, WRI, the 2° Investing Initiative

Climate strategies and metrics (4.5 MB | 81 pages)