Willis Towers Watson is the latest financial provider to commit to a net zero target by 2050.
The company said that as part of this commitment it plans at least a 50 per cent reduction in greenhouse gas emissions across all its discretionary delegated investment portfolios by 2030.
WTW’s global chief investment officer Craig Baker says: “Climate change, and a just transition to net zero greenhouse gas emissions, is a systemic and urgent global challenge.
“We believe that working to achieve net zero by 2050 in our discretionary portfolios is completely consistent with the financial goals we have been given by our clients as climate change has the potential to impact returns across multiple asset classes. We have already embedded this in our investment process and ultimately in the portfolios we are managing and stewarding.
“Being strategically ahead of a net zero transition will, in our opinion, significantly improve risk-adjusted returns for our clients.”
Baker says this will come from two sources: ‘better beta’ due to more effective stewardship, and ‘alpha’ as the mispricing of climate issues is resolved.
He adds: “We think that understanding this transition will be one of the biggest sources of ‘alpha’ across all asset classes and that this opportunity is likely to be greatest in the next few years. We will therefore target pathways to net zero that seek out pricing opportunities while delivering a reduction in emissions of more than 50 per cent between 2015 and 2030, consistent with the goals of the Paris Agreement.”
He says that there is at present no single definitive metric that can be used to adequately measure progress of either an individual company or the whole investment industry in stewarding the transition to a net zero and climate-resilient economy is an important issue.
Baker adds: “Measurement of our progress and that of the whole investment industry in stewarding the transition to a net zero and climate-resilient economy is an important issue.
“There is no single definitive metric that can be used to adequately measure progress and the data and analytics in the climate space are rapidly evolving. We are therefore investing heavily in leading analytics in this space, including our proprietary Carbon Journey Plan methodology, the ‘impact measurement framework’ that we have developed together with other industry participants via the Thinking Ahead Institute, our acquisition of Acclimatise in December 2020, and the arrival of the energy finance team from the Climate Policy Initiative in January 2021.
“We will also continue to work with our advisory clients to set out and deliver on their own climate-related goals via Carbon Journey Plans, including analytics on how climate change might impact liabilities as well as assets.”
In addition to integrating climate risk into its multi-asset investment process, WTW also offers a range of multi-manager funds where sustainable investment is a key part of the investment proposition, which clients can use to help them achieve their sustainable investment goals.
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