IIGCC Net Zero Investment Framework: Portfolio Testing Results

The Institutional Investors Group on Climate Change (IIGCC) launched its Paris Aligned Investment Initiative (PAII) in May 2019. Its aim is to explore how investors can align their portfolios with the goals of the Paris Agreement. More than 70 IIGCC members, representing over US$16 trillion in assets under management (AUM), have engaged in the initiative to date. In August 2020, IIGCC published a consultation on a Net Zero Investment Framework (‘the Framework’), which was developed through the PAII. The goal of the Framework is to provide a basis for a broad range of asset owners and asset managers to define strategies for aligning their investments with the goals of the Paris Agreement. Since the publication of the consultation, five investors have been working together to test the Framework on real-world portfolios. This report describes the testing phase and its outcomes. The investors constructed Paris-aligned portfolios using the recommendations set out in the Net Zero Investment Framework. They then tested their current and aligned portfolios by modelling their financial performance in a range of different climate scenarios. These scenarios included a baseline that sees a continuation of current policies and several scenarios with ambitious action towards meeting the goals of the Paris Agreement.