WTW pledges net-zero greenhouse gas emissions in investment portfolios by 2050
In addition, Willis Towers Watson lists 10 actions that institutional investors can take to address climate change in their own portfolios.
Acknowledging the financial impact of climate change, Willis Towers Watson recently announced that it is committing to achieving net zero greenhouse gas emissions in its discretionary investment portfolios by 2050, and aims to reduce emissions by 50% by 2030.
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“Climate change and its growing impact on society represents a significant global challenge,” John Haley, CEO of WTW, said in a statement on Monday.
“As one of the world’s leading risk advisors and experts in assessing and mitigating climate risk, Willis Towers Watson is committed to supporting measures aimed at helping to tackle climate change. The need to manage climate risk and support an orderly transition to a low-carbon, resilient economy is no longer solely a matter of conscience but a strategic and financial imperative.”
WTW has more than $165 billion in assets under discretion, the company noted, and advises on more than $3.5 trillion.
The organization outlined in a detailed pledge specific actions it will take in its portfolio to achieve its goals.
“We believe that working to achieve net zero by 2050 is completely consistent with the financial goals we have been given by our clients, so we have already embedded this in our investment process and ultimately in the portfolios we are managing and stewarding,” Craig Baker, global chief investment officer, said in a statement.
It’s taking an educate-and-engage approach to climate change, emphasizing collaboration in its investment decisions, rather than simply dropping certain investments.
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“We believe engagement is likely to be more effective in decarbonizing the system than exclusions alone, but recognize that exclusions may be necessary at times where engagement cannot solve the problem,” according to WTW.
The actions WTW will take include:
- Decarbonizing existing investments and investing in long-term climate solutions.
- Assessing climate risk in macro investment landscapes, asset allocations and security-level analysis of portfolios.
- Seeking out skilled asset managers who have incorporated climate risk screening into their investment process, and working with them to identify specific assets with the most long-term potential.
- Encouraging and supporting stewardship among asset managers.
- Choosing market indexes and benchmarks that incorporate climate risk factors, and contributing to new indexes.
Willis Towers Watson is counting on climate change mitigation being a source of alpha over the coming years, as markets come to better understand, and accurately price, climate issues.
WTW acknowledged that being a first-mover on climate change technology isn’t necessarily the aim.
“It needs to be recognized that it is not in our clients’ financial interests to force ourselves to always be ahead of the pathway to net zero regardless of market pricing or the magnitude of the risk posed by climate change,” the organization wrote.
“We believe that the important things for the long-term financial outcomes for our clients’ portfolios are the destination and the overall trajectory of decarbonization, rather than the position at every point along the path to net zero.”
WTW outlined 10 solutions that institutional investors can take to address climate change in their own portfolios:
- Benchmark the current approach relative to peers and global best practices.
- Establish the mission, beliefs and purpose regarding climate strategy.
- Establish pathways to the carbonize portfolios.
- Stress test portfolios for climate risk.
- Analyze the impact of extreme and changing weather on real assets.
- Identify thematic risk and opportunity to take strategic long-term positions.
- Begin funding solutions based on climate research.
- Establish policies for excluding high-carbon investments.
- Establish portfolio reporting and analysis guidelines.
- Adopt enhanced reporting to manage climate risk and opportunity.
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