investment viewpoints
G7 furthers net-zero momentum
Net zero is a deepening investment theme: a source of enduring opportunity, a sustainability risk to be assessed with a fiduciary mindset and an inevitable disclosure requirement.
It is one of the greatest economic challenges of all time and a turning point for our species – and investors can thrive by playing a role in its success – simply by targeting businesses which should prosper in the transition to, and within, a net-zero economy.
G7: sights on net zero
The meeting of the G7 finance ministers and central-bank governors in London last week further reinforced the policy focus on net zero among major developed-market economies – and why financial-sector involvement is essential.
“We emphasise the need to green the global financial system so that financial decisions take climate considerations into account,” states the official communique. “This will help mobilise the trillions of dollars of private sector finance needed, and reinforce government policy to meet our net-zero commitments.”
Indeed, investment capital is essential in driving the transition, and forward-looking investors with the right analytical capabilities are best placed to direct it to companies preparing for an emissions-free future, in our view.
Regulatory duty
Net zero creates both risks and opportunities that investors must recognise and respond to, in our view. Crucial to long-term performance and sustainability, we believe it is part of fiduciary duty. This perspective is aligned with the policy direction indicated by the G7.
“G7 authorities consider it important for financial firms to manage the financial risks of climate change using the same risk management standards as applied to other financial risks,” the communique states.
In the UK, investor reporting on climate risk is an emerging regulatory necessity and would be assisted by greater transparency from companies on their emissions and reduction targets. The G7 supports consistent, investor-relevant corporate disclosures on frameworks set by the Task Force on Climate-related Financial Disclosures (TCFD) and domestic regulators.
The stage is now set for this momentum to move towards the G20, where finance ministers and central-bank governors will meet in July and October, and we expect climate as well as nature and biodiversity to be firmly on the agenda.
TargetNetZero with LOIM
We are rethinking net zero. Aware of the real flaws in low-carbon strategies and decarbonisation benchmarks, we take a forward-looking view of transition opportunities and risks across the global economy – seeking to diversify, deliver performance and drive the transition.
Our core TargetNetZero equity and high-conviction TargetNetZero fixed-income strategies offer the following characteristics:
• Climate growth opportunities by targeting companies with genuine decarbonisation trajectories
• Diversification through investment in all sectors of the entire economy
• Disciplined decarbonisation: 50% and 100% reductions in scope 1, 2 and 3 emissions by 2030 and 2050 respectively
• Transition acceleration by including decarbonising companies in high-emission sectors – where investment and progress is vital
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