ESG Club interview – The Institutional Investors Group on Climate Change


the wrong track – overall, the momentum is clearly behind the transition.


The Church of England Pensions Board has left the Net-Zero Asset Owner Alliance. This was due to it also being part of the Paris Aligned Asset Owners initiative and it not being tangible to maintain two report- ing frameworks. What lessons do you take from this?


The alliance and the framework are two separate entities focused on achieving the same end. Therefore, the Church of England Pensions


Board decided to


rationalise and go with only one of them. That makes sense from the administra- tive side.


In some parts of the wider press, it was presented as a bad thing and a worry, but that wasn’t the case. In fact, it shows they are taking this seriously and work- ing out the practical implementation of their plans.


Isn’t the lesson though that investors could be getting bogged down by an excessive amount of net zero and climate change initiatives? Ultimately, as long as there are the base- line standards, it does not matter what route to net zero investors choose, they are going to get there one way or another. Connected to this, we are looking at the best ways for investors to pledge their net- zero targets. As a lot of investor sustaina- ble reports are patchy, we need to work towards more streamlined standards building on some of the good work to date, including the ISSB standards.


Do you support investors who wish to divest from companies which are failing on climate change, or prefer them to use their clout to drive change? I wouldn’t favour investors going one way or the other, without knowing their specific situation. But there are a few studies show- ing that mass divestment as a movement does not change the cost of capital for com- panies and that investment is still available


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even if others take a stand and divest. Critically, we have seen that investor engagement works, as seen by the results achieved by Climate Action 100+. Ulti- mately, it can shift the way companies approach net zero and can move the dial over time. In Australia, for example, we’ve seen the role institutional investors have played in getting Qantas to speed up their net- zero targets.


IIGCC created the Net Zero Standard for Oil and Gas companies. How will that help investors?


It offers a benchmark for investors engaging with oil and gas companies and the steps they need to take to align with net zero. Setting out different aligning criteria and best practices, including transition plans, gives companies a benchmark. So when investors engage with oil and gas compa- nies they know that they need to do x, y and z as there is a benchmark to refer to and measure them by.


IIGCC has issued net-zero guidance in an attempt to encourage bond engagement. What is the ultimate objective there? A lot of the activity investors have had around climate change has been with equities. There is now a focus to put that on fixed income.


There are different levers and different ways of looking at fixed income, which is a large asset class. Ultimately, there is a question of how investors use their posi- tion as holders of equity and debt and the levers this gives them to support busi- nesses make the transition to net zero.


How much of a problem is greenwashing? The issues around greenwashing that emerged a few years ago have subsided to some extent. On a day-to-day basis, I do not come across it much, if at all. It is mostly used in advertising [of invest- ments] to play up certain credentials, which are, in fact, not there.


There has been some good, clear guid- ance, particularly in the UK among regu- lators about what they will stand for and what they won’t as far as climate claims go. Overall, we see little of it these days. The term ‘greenhushing’ is more applica- ble. For instance, where [EU] Article 9 funds are moved to Article 8 because investors don’t want to be seen pushing too hard on this. They want to be more understated than overstated.


What would you say IIGCC is good at and what needs improving? We have been good at assisting and bring- ing asset owners and asset managers together to rapidly move towards net zero, as seen by the success of the net-zero ini- tiatives. It has been more successful than we imagined two or three years ago and has been done in a partial policy and reg- ulatory vacuum on how to address the goals of the Paris Agreement. In terms of areas for development, we need to continue to make the case for net- zero commitments and to explain our role within this. For instance, we need to con- tinue to explain that net-zero initiatives are there to provide a platform for ambi- tion and disclosures, and to give an idea of what is possible into the future – not to act as a quasi-regulatory body or to police greenwashing. The aspirational narrative sometimes gets lost.


What are your hopes and fears in terms of institutional investors addressing climate change?


I hope investors continue at the pace and passion over the next decade that they have shown in addressing the issue in the last four years.


While the pace of change was always go- ing to come up against some friction, in- cluding from organisational change man- agement, we can’t afford to see the pace slow too much during this difficult phase. Ultimately, I just hope organisations stay the course and keep up the good work as climate change is not going away.


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