Recommendations for Accelerating Viable Transition Finance Structures

These are a set of recommendations to serve as an actionable guide for asset managers, asset owners, Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs), and policymakers to accelerate the flow of capital, at scale, toward viable and credible transition finance structures. Despite the wide range of viable transition finance structures, these recommendations call for a credible and inclusive transition definition, a supportive enabling and policy environment, and appropriate levels of blended finance and investment de-risking.

Download the full Recommendations for Accelerating Viable Transition Finance Structures here

Investor Expectations for Banking Transition to Net-Zero Emissions

Recognizing the scale and urgency of the action needed, the AMAO Task Force has developed a set of investor expectations asking banks to raise their climate ambitions by striving for a goal of global net-zero emissions by 2050. The Task Force is asking to make this commitment in order to manage climate-related risks and proactively position themselves for a low carbon economy.  These asks are meant to serve as an example of best practice - they are not intended to be overly prescriptive, and accelerate actions that - if taken - will lead to faster decarbonization of a critical industry.

Download the full Investor Expectations for Banking Transition to Net-Zero Emissions document here

Asset Owner Practitioner's Guide: Net-Zero Allocation

The members of the Net-Zero Asset Allocation Working Group, working on behalf of the SMI Asset Manager & Asset Owner Task Force, propose a framework of principles and best practices dedicated to all types of asset owners to include climate change and net-zero considerations in portfolio construction.

Download the full Net-Zero Allocation Paper here

Investor Expectations for Shipping Transition to Net-Zero Emissions

Climate risk is investment risk. As investors continue to orient their asset stewardship programs to reflect this reality, hard-to-abate sectors each present their own stewardship and engagement challenges. This document work lays out considerations investors can take into account when engaging with companies in their portfolios engaged across the shipping industry to support to transition of this sector to net-zero. The Task Force looks forward to continuing this work across hard-to-abate industries.

Download the full Investor Expectations for Shipping Transition to Net-Zero Emissions document here

Letter of Intent

Download the full Letter of Intent

At HRH’s request and recognizing the important capital allocation role of institutional investors, Ron O’Hanley, Chairman and CEO of State Street, convened the CEOs of some of the world’s largest asset owners and asset managers to form and lead the SMI’s Asset Manager and Asset Owner Task Force (AMAO Task Force). The Task Force is aimed at finding scalable ways for institutional investors to facilitate the reallocation of capital toward sustainable solutions, using the two most powerful levers at their disposal: 1) capital already invested in companies; and 2) fresh capital investments directed at climate mitigation and adaptation projects.

In coordination with the other SMI Task Forces, the AMAO Task Force will focus on the following areas ahead of the 26th UN Climate Change Conference of the Parties (COP26) in November 2021:

Stewardship and Engagement: creating a detailed framework for portfolio companies in selected industries to develop disclosure transition plans to net zero in line with the COP process, which may include intermediate targets and consider capex implications.

Net-Zero Pathways for Asset Managers and Asset Owners: devising a multi-year plan for asset managers to work with their asset owner clients toward decarbonizing their portfolios, including developing strategic asset allocation guidelines advancing the goal of reaching net zero emissions across their asset base by 2050 or sooner.

To achieve these first two goals, subject to their domestic laws and regulations and on a voluntary basis, the members of the Task Force shall:

1. Engage with relevant portfolio companies (public and private) on comprehensive net-zero transition plans with science-based interim targets
   
   

2. Integrate sustainability considerations into our portfolio managers’ investment risk frameworks wherever and whenever possible
   
   

3. Engage with regulators and industry standard-setters to drive convergence on climate metrics and methodologies aligned with the TCFD framework

To facilitate and accelerate the fresh capital investments needed to achieve the COP process goals, the Task Force further strives to:

Scale Sustainable Investments: working with governments and multi-lateral institutions, create more readily available mechanisms for deploying institutional capital to climate change mitigation or adaptation projects, including innovative technologies, by addressing credit enhancements, risk-sharing, and appropriate investment vehicles.

Create Transition Funds for SMI Focus Areas: identifying viable fund structures that would allow for global capital raising by mitigating legal or tax barriers and accounting for underlying political and/or manager risk.

The Task Force will provide updates throughout the year with the goal of reporting final commitments ahead of the COP26 meetings in November.

Further information

For roundtable and Task Force enquiries please contact, Jerome Fitzgerald, Chief Industry Officer, Sustainable Markets Initiative:

Email: j.fitzgerald@sustainable-markets.org