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Helpful guidance from The Investor Agenda on climate and investments – but does it suit all?

We’re working with several of you to integrate climate considerations into investment strategies. Because of this, we’re always keeping an eye on what’s available to help guide faith-based asset owners. Recently, we looked at The Investor Agenda Investor Climate Action Plans (ICAPs) Expectations Ladder – published earlier this year. We found that whilst the guidance might help investors use a range of levers to make investments more aligned with climate goals, many of the activities recommended may be out of reach for smaller asset owners.

The Investors Agenda – a group of seven large organisations – exists to guide and support investors in addressing and reporting on climate change in their investment portfolios. Their so-called Expectations Ladder has four Tiers across four areas. At Tier 4 are those investors starting to integrate climate consideration into their portfolios. This runs up to Tier 1 – the net-zero standard setters. Users are encouraged to self-assess where they are positioned along the Ladder within the ICAPs four focus area of action: Investments (managing risks and shifting capital), Corporate Engagement, Investor Disclosure, and Policy Advocacy, with Governance as a cross-cutting theme. Activities that investors take, or can take, to align their portfolios are listed under each Tier. The group emphasises that when self-assessing, investors need to be transparent about where there are gaps in assessing or reporting on emissions impact in certain asset classes or sectors.

Is the guidance useful? Investors might like to integrate elements of the Ladder into their existing investment strategies and assess, for example, how increasingly prevalent issues, such as climate risk, are managed. The Ladder also encourages a holistic approach. In addition to target setting and asset allocation, also emphasised are a range of levers that can affect change, including, for example, bilateral and stakeholder engagement, policy advocacy, just transition principles, and variables such as the skill set of Boards for managing climate risks.

The greatest benefit might be for investors who want to publish their own standalone plan or pathway for aligning their portfolios with a net-zero emissions target. The Ladder does come with a Guidance document on how this might be done. Target setting is key – and this is where initiatives such as the Science Based Target Initiative can be found.

But is this guidance only suited towards a particular type of investor? Many of the activities, or levers contained are well beyond the resource capability of small faith-based asset owners, including those we often work with in FaithInvest. Earlier this year, we reported on the significant challenges small faith groups face when seeking to invest in line with their values – values which often set a moral imperative to addressing climate change. Steps such as asset allocation, monitoring and reporting, activism and engagement bring complexities requiring specialised resources and expertise which small asset owners often lack. There are solutions however, as noted in our paper, related to engaging the services of an outsourced chief investment officer or a consultant, and joining a peer network. Considering these solutions in line with existing resources and priorities is a necessary first step.

If you are interested in how climate concerns can be integrated more fully into investment strategies, watch this space for our upcoming read of the Church Commissioners of England’s recently published Climate Action Plan for their portfolio.


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