Listed Equity & Corporate Fixed Income

Case studies

Setting asset level targets using the Net Zero Investment Framework: Comgest

Using the Net Zero Investment Framework to develop an effective engagement programme: KBI Global Investors

Implementing a robust engagement strategy: Nest Pensions

As with all asset classes, the asset alignment target can be can be split into the five steps.

1. Setting the scope

All assets within listed equity and corporate fixed income portfolios and funds are recommended to be considered within initial scope. Within this, all sectors considered “material” to the net zero transition, defined as those in NACE code categories A-H and J-L, are recommended to be considered for assessment and subject to the asset alignment target.

2. Assessing alignment

The alignment assessment utilises six alignment criteria.

High impact companies are encouraged to be assessed against all six alignment criteria, which includes the asterisked criteria in the table below. All other companies are deemed material but ‘lower impact’. Investors can assess the alignment of lower impact material companies against the criteria: ambition, targets; disclosure; and emissions performance.

3. Setting the target

Once the investor carries out a baseline year assessment, the investor can set an asset alignment target:

• A 5-year asset alignment target for increasing the percentage of AUM or financed emissions in material sectors that are ‘aligned’ or ‘aligning’ to a net zero pathway, or ‘achieving net zero’.

As a minimum, NZIF recommends that the target is set with the ambition to achieve 100% asset alignment by 2040, and that engagement and stewardship action continues until companies are aligned or net zero.

4. Delivering the target

Investors may utilise multiple levers to support the transition of assets and increase the likelihood of achieving an asset alignment target. NZIF identifies three main levers – engagement and escalation strategy, portfolio construction, and investment mandates – that can be used alongside other levers that are not necessarily asset class specific, such as policy advocacy and engagement with other industry actors.

5. Monitoring the target

Investors are recommended to review and update targets, with portfolio alignment assessments and disclosures recommended to take place on at least a yearly basis.

See ‘across all asset classes’ for more detail on disclosure and attribution analysis.