Paris Aligned Investment Initiative

Overview

IIGCC’s Paris Aligned Investment Initiative (PAII) looks at how investors can align their portfolios to the goals of the Paris Agreement.

The Paris Aligned Investment Initiative (PAII) was established in May 2019 by the Institutional Investors Group on Climate Change (IIGCC) at the request of asset owner members, it now involves over 110 investors representing $33 trillion in assets. As of March 2021, the initiative has grown into a global collaboration supported by four regional investor networks – AIGCC (Asia), Ceres (North America), IIGCC (Europe) and IGCC (Australasia).

The initiative has the following objectives:

Develop definitions for key concepts relating to alignment of portfolios with the goals of the Paris Agreement and build consensus around these among investors.
Assess approaches and methodologies that can be used to measure alignment, and transition portfolios, across different asset classes to identity best practice options for achieving alignment to Paris.
Enable investors to understand the implications of transitioning portfolios by testing the approaches and methodologies for transition using real world portfolios to analyse financial characteristics, risks and opportunities associated with transition of portfolios.
Provide a transparent basis for investors to make commitments to achieve global net zero emissions by 2050 or sooner, in line with the Paris Agreement and take comprehensive, science-based, effective action towards this goal.
Support investors to implement these best practice methodologies and approaches, addressing challenges and barriers, in order to drive real economy transition towards a net zero and resilient future.

A first output of this process is a framework for ‘Paris alignment’ by investors (see the next section below). This looks to ensure investors can maximise the contribution they make in limiting global warming to no more than 1.5°C, in line with the latest science and higher end ambition of the Paris Agreement.

Putting this objective into practice means investors should look to ensure their portfolios are working to help achieve net zero emissions by 2050 at the latest. The way to achieve Paris alignment is therefore by becoming a ‘net zero investor’. IIGCC’s Net Zero Investment Framework (covered below) has been developed with this aim in mind.

Net Zero Investment Framework

The Net Zero Investment Framework, published in March 2021, provides a common set of recommended actions, metrics and methodologies through which investors can maximise their contribution to achieving global net zero global emissions by 2050 or sooner. Its primary objective is to ensure investors can decarbonise investment portfolios and increase investment in climate solutions, in a way that is consistent with a 1.5°C net zero emissions future. An ‘investment strategy’ led approach, supported by concrete targets set at portfolio and asset level – combined with smart capital allocation, and engagement and advocacy activity – ensures investors can maximise their impact in driving real-world decarbonisation. Four different asset classes – sovereign bonds, listed equities and corporate fixed income and real estate – are covered by the framework, with others to follow. Five investors will also be putting the framework to the test, by modelling its impact across performance of their real-word portfolios collectively valued at $1.3 trillion. The results of this analysis can be found here. The Framework is intended to be adopted and implemented by investors following a PAII Net Zero Asset Owner Commitment or a Net Zero Asset Managers initiative commitment. The Framework has been developed through the collaborative input of the 110 plus IIGCC members who are participating in PAII. We are grateful for the valuable contributions and insight of the investors that are part of the initiative.

Key resources:

Net Zero Investment Framework - this is the full version of the Framework issued in March 2021. See here for a direct download. Portfolio testing report – this is the accompanying portfolio testing report produced in partnership with planetrics and vivideconomics. See here for a direct download. PAII Asset Owner Commitment – this is the full Paris Aligned Investment Initiative Net Zero Asset Owner Commitment which is signed by investors. See here for a direct download. Supporting presentation - this slide deck helps provide an overview of PAII and detail behind the Net Zero Investment Framework. See here for a slide only version of the presentation and here for a version with accompanying notes. See here to watch our webinar from September 2020, where investors provide an overview of the Framework out for consultation and next steps for IIGCC’s Paris Aligned Investment Initiative. Framework launch press release - see the accompanying announcement here on the launch of the Net Zero Investment Framework, as the first-ever blueprint to help investors become 'net zero investors'. PAII backgrounder - see here for a supporting backgrounder, providing more context on the aims, objectives and deliverables of the PAII initiative.

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Investor guide

16.05.23

Cross programme

Net Zero Investment Framework Component for the Private Equity Industry