Net Zero in the Balance: A Guide to Transformative Industry Thinking, CFA Institute

New research published today by the CFA Institute Research and Policy Center brings forward expert insights from more than 20 leading thinkers and investors to support the complex systems-level thinking and large transformative change that will be required to address net-zero ambitions.

The research “Net Zero in the Balance: A Guide to Transformative Industry Thinking” explores the future of net-zero investing and stresses the importance of mindset shifts and innovative strategies to achieve net zero. It is a practical resource for investment industry leaders and organizations that choose to engage in net-zero investing.

Margaret Franklin, CFA, President and CEO, CFA Institute comments:

“Addressing net zero within a system focused on investment risk and return represents an extraordinary challenge. As a global industry, new thinking and tools are needed to meet the unprecedented complexity and scale of the problem. Whether the motivation is financial, altruistic, or both, determining a net-zero roadmap is no mean feat. Net-zero investors are looking for expert insights, educational offerings, resources, and tools to help support their efforts. The research and interviews undertaken for this guide indicate that the pathway to global net-zero emissions and the development of net-zero investing will be arduous and uneven. We at CFA Institute are committed to supporting the investment industry as it navigates through this deeply challenging new area.”

Key Takeaways:

The research identifies three critical components of successful net-zero investing:

• The role of organizing frameworks to adapt to the big shift in the investment ecosystem
  • Organizing frameworks are essential for putting net-zero investing into practice. Frameworks recognize net-zero investing as part of sustainable finance, with asset owners making commitments within their fiduciary responsibility and asset managers implementing these commitments.

   

• The role of innovations for integrating net-zero investing into mainstream investing
  • Innovations are necessary for wider adoption of net-zero investing, including balanced scorecards to consolidate multiple measurements of progress towards net-zero goals, total portfolio thinking, universal ownership theory, and an expanded version of stewardship.

     

• The careful balance of investment strategies
  
  • Investment strategies for net-zero investing must balance net-zero goals with risk and return goals. The strategy for asset owners in most cases must support the dual mandate of meeting net-zero goals without compromising on the highest possible risk adjusted returns.
  • A net-zero investment strategy must aim to achieve alignments with government and regulators on the net-zero pathway. Sometimes investors will follow governments, and sometimes they will lead government.

The guide, authored by Roger Urwin, FSIP, also draws on its findings to offer a high-level net-zero roadmap to assist with planning and informing stakeholders, identifying and communicating net-zero priorities and goals, and to build clarity on what success looks like.

Paul Andrews, Managing Director for Research, Advocacy, and Standards, CFA Institute adds:

“The systemic barriers to achieving net zero remain deeply entrenched. Acknowledging that investment objectives ultimately lie with the end client, we seek to support investors considering net zero by researching, delivering, and advocating for the knowledge, skills, tools, practices, and abilities needed to analyze and act on the financial risks and opportunities associated with climate change and the net-zero transition. Great interest exists for action on net zero across the industry and among policymakers. We offer this guide for industry leaders and organizations as a key contribution to the ongoing conversation on net-zero investing as they tackle the obstacles ahead.”

To access the report, visit: Net Zero in the Balance: A Guide to Transformative Industry Thinking.