Along with its partners as part of the Paris Aligned Investment Initiative (PAII), IIGCC has released NZIF guidance on externally managed funds.
The guidance offers a streamlined framework to help allocators assess and improve how externally managed funds support their net zero goals using six alignment criteria: ambition, governance, targets, decarbonisation plan, disclosure, and climate performance.
It gives allocators a clear, practical method to strengthen influence, enhance comparability, reduce due‑diligence, and support meaningful contributions to real‑economy decarbonisation even with delegated investment structures.
This guidance is an addendum to NZIF 2.0 and supports investors who have delegated or otherwise lack discretionary decision making over asset selection, management, or engagement.
Why this guidance is needed:
- Delegated structures limit agency: External managers control key decisions, risking misalignment with allocators’ net zero goals.
- Climate risks persist: Delegation does not remove exposure to climate-related financial risks which ultimately still fall on beneficiaries.
- Practices vary widely: Divergent fund approaches to investment and stewardship increase due‑diligence effort and hinder comparability.
- Delegation limits influence: Externally managed funds distance allocators from core levers for driving real‑economy change.
How this guidance supports allocators:
- Provides a clear approach: Allocators are provided a structured method to assess how external funds manage climate risks.
- Uses common criteria: Applies shared measures to improve comparability across funds.
- Lowers due‑diligence effort: The repeatable framework can reduce due diligence costs for both allocators and investment managers.
- Enhances allocator influence: Enables expectation‑setting even when direct investment levers are limited.
- Supports real‑economy impact: Guides fund selection and engagement to encourage credible climate action.
- Improves accountability: Promotes consistent information exchange for clearer oversight.