In this video, Craig Mackenzie, head of strategic asset allocation (SAA) at Aberdeen Standard Investments, explains the role SAA plays in the net zero framework of the Institutional Investors Group on Climate Change (IIGCC).
Using portfolio optimisation tools and climate change scenarios, Mackenzie and his team modelled portfolios with the same and better returns as standard SAA, but with 40-50% lower carbon emissions.
While every investor has different objectives, Mackenzie said that all will need to shift their investments to low-carbon benchmarks and towards climate solution funds to follow a net zero pathway.
The IIGCC’s net zero framework is expected to be finalised by the end of 2020.
A group of 30 investors with $5trn (€4.23trn) of assets under management, and part of the UN-convened Net-Zero Asset Owner Alliance, recently announced concrete targets to decarbonise their portfolios according to a 1.5°C warming scenario for the next five years.