Mercer has launched climate transition analytics and advice for institutional investors who want to transition to a 1.5°C scenario of global warming as outlined in the Paris Agreement. Climate change science has shown that to halt climate change, carbon emissions have to stop completely. ‘Net zero’ means that any emissions are balanced by absorbing an equivalent amount from the atmosphere.
The solution, called Analytics for Climate Transition (ACT) will help investors construct climate resilient portfolios on a multi-year timeframe, as 1.5°C requires a 45 per cent emissions reduction by 2030. ACT is now being offered to Mercer’s investment consulting clients worldwide and will be leveraged to support climate transition strategies across its USD304.5 billion global assets under management on behalf of its Investment Solutions clients.
“Many investors are not yet equipped to invest in a decarbonising economy, and some don’t know where to start. Our analytics and advice will help investors transition their portfolios to take on the challenges of managing climate risk, in their endeavour to meet return objectives while staying on target for a net zero outcome,” says Helga Birgden, Global Business Leader, Responsible Investment, Mercer.
ACT was developed because institutional investors are seeking ways to assess the companies they are invested in with respect to their commitment and ability to, transition to a net zero economy by 2050, with an important milestone of 45 per cent emissions reduction by 2030. Through ACT, Mercer can help investors set portfolio investment baselines; assess portfolio opportunities; establish targets and produce implementation plans that can be integrated with strategy and portfolio construction decisions.
“As investors increasingly seek to set net zero targets and align their portfolios to a 1.5°C global warming outcome, it is vital that they are equipped with the necessary tools and analysis to do so. The analytics and advice builds on Mercer’s pioneering climate scenario analysis and aims to support investors in setting net zero targets, outlining a pathway to net zero and measuring their progress as the transition progresses,” says Kate Brett, Head of Responsible Investment – Europe, Mercer.
Mercer’s framework and analytics draw on multiple data providers and metrics to assess portfolios across a spectrum of carbon risk, with portfolios ranked from low transition capacity (gray investments) to investments that are low carbon risk/zero carbon already, or are providing climate solutions (green investments). The majority of companies in investor portfolios fall somewhere in between the two sides.
Mercer’s climate change research and guidance is a Mercer-wide collaboration and spans Research, Advice and Investment Solutions. Mercer’s Responsible Investing Pathway maps out the full scope of the responsible investment advisory services Mercer offers, structured around integrating ESG and climate change into the core stages of investment: beliefs, policy and process, and portfolio implementation.