Review of 230 Investors Finds that Comprehensive Climate Action Planning is Becoming Common Practice

Posted 5th December 2024

In a review of 230* institutional investors’ climate action planning from regions across the globe, including North America, Asia and Oceania, we found that, overall, climate transition plans are becoming common practice, with increasing numbers of investors voluntarily developing climate transition plans.

Investors have made target setting and corporate engagement key components of their transition plans.

Climate disclosures by investors are improving, and most investors have TCFD- aligned disclosures (in the future, these disclosures will be aligned with ISSB’s S2 expectations following the sunsetting of TCFD into ISSB).

While investors are taking action on climate policy advocacy, forward-looking plans in this area are still lacking.

*There may be instances of overlap where the same global investors have been included in more than one survey so the actual number of investors represented may be less than 230.

Climate transition plans, and the public disclosure of those plans, are shifting from a voluntary practice to a regulatory requirement in several jurisdictions worldwide, including the EU, UK, Canada, Singapore, Switzerland. Current and future regulations are requiring investors and companies to disclose not only their climate risks but also their plans for addressing these risks. This includes setting targets, outlining implementation strategies, and articulating how they intend to maximize opportunities in a low carbon future.

Over 75% of investors in net zero alliances like Paris Aligned Asset Owners (PAAO) or the Net Zero Asset Managers (NZAM) have voluntarily disclosed climate transition plans.

Given the increasing focus on climate transition plans by investors and regulators, we reviewed the trends of investor climate action planning from regions across the globe, including North America, Asia and Oceania, to identify emerging themes, specifically on the four focus areas of the Investor Climate Action Plans (ICAP) Expectations Ladder. The findings are based on AIGCC, CDP, Ceres, PRI, and IGCC reviews of investor climate action plans in their respective regions. Asia Investor Group on Climate Change (AIGCC)’s survey captures responses from 58 members in their network in 2024 and the Investor Group on Climate Change (IGCC)’s reflects the responses from 63 Australian members. Ceres and PRI reviewed publicly available climate disclosures made by 48 of the world’s largest and most influential North American investors in 2024 who were chosen based on the Thinking Ahead Institute’s annual list of the top global asset owners and asset managers.

A climate transition plan is a set of goals, actions, and accountability mechanisms to align an organization’s business activities with a pathway for greenhouse gas emissions consistent with reaching net zero by 2050 at the latest. The Investor Climate Action Plans (ICAPs) Expectations Ladder provides a framework for ensuring that an investor’s transition plan is comprehensive and that it includes decision-useful information for clients, regulators, and other stakeholders in four interlocking areas of action: investment, corporate engagement, policy advocacy and investor disclosure, with governance as a cross-cutting area.

Source: ICAPs Guidance

The Findings

We found that, overall, climate transition plans are becoming a common practice, with an increasing number of investors voluntarily developing climate transition plans. In the Investor Group on Climate Change (IGCC)’s latest survey of its members in Australia, it found that 65% of respondents reported having a climate action plan, a significant increase from 36% in 2023. Similarly, the AIGCC’s survey of their members in Asia found about 50% of respondents reported having a climate transition plan/investor climate action plan for achieving their net-zero objectives and targets. In North America, Ceres found that 77% of the 48 largest and most influential North American investors have some elements of a plan in place. While CDP data showed that only 27% of financial institutions in North America disclosing through CDP currently have climate transition plans, an additional 46% of respondents stated they plan to develop them within 2 years.

Investment

Target setting is a key component of transition plans, and many global investors have set net zero targets. IGCC reported that over 75% of the Australian investors surveyed have set a net zero by 2050 (or earlier) target across whole or part of their portfolio. AIGCC saw a similarly large percentage, of about 70% of their Asian investor base setting net zero targets across all or part of their portfolio. In North America, Ceres also found that 77% of the North American investors surveyed and CDP found 47% of the investors responding to the CDP Financial Services Questionnaire had targets. Investors have joined global net zero initiatives such as the Net Zero Asset Managers, Paris Aligned Asset Owners, and the UN-convened Net Zero Asset Owner Alliance to bring credibility and transparency to their targets. 50% of AIGCC’s investors surveyed, 16% of IGCC’s, 15% of CDP’s, and 33% of investors reviewed by Ceres are signatories to these initiatives.

Climate solutions investments are becoming an area of focus in investors’ climate transition plans, but more progress is needed to scale up investments across a broader range of climate solutions to accelerate the transition. Almost 40% of the Asia-based investors, 70% of Australian investors, and 50% of North American investors surveyed have set a climate solutions investment target or intend to set one.

Corporate Engagement

Investors are demonstrating that corporate engagement is a key component of their transition plans. The Ceres review indicated that 81% of large North American investors conduct bilateral engagements with the companies they are invested in, viewing this focus area as one of the most effective levers to decarbonize investee companies. CDP found a similarly high figure of 95% of North American financial institutions engage their value chain on climate issues. AIGCC and IGCC reported that 71% and 68% of their members respectively engage directly with companies on climate. In particular, investors are focusing on corporate climate transition plans, asking companies to disclose how they intend to work across their business to address the risks of climate change and maximize the opportunities to thrive in a low-carbon future through initiatives like Climate Action 100+.

Disclosure

Climate disclosures by investors are improving, and most investors have TCFD aligned disclosures (in the future, these disclosures will be aligned with ISSB’s S2 expectations following the sunsetting of TCFD into ISSB). In AIGCC’s survey, 76% of investors reported providing climate disclosures annually. IGCC found 62% of investors voluntarily reporting against the recommendations of the TCFD which is an increase from last year of 53%. Moreover, data from Ceres found that 85% of the largest investors in North America had a TCFD-aligned report. In 2023, 575 financial institutions disclosed to CDP’s Financial Services Questionnaire aligned with TCFD, an increase from the previous years. Investor signatories of net zero alliances such as the Paris Aligned Asset Owners (PAAO) also reported TCFD-aligned disclosures, with 95% of respondents to the 2023 PAAO survey having published one.

Policy Advocacy

While investors are taking action on climate policy advocacy, forward-looking plans in this area are still lacking. Ceres found that only half of the North American investors reviewed mentioned their policy advocacy plans. A clear articulation in an investor’s climate transition plan of how they will engage policymakers and regulators on climate change risks and opportunities is a crucial component of a comprehensive and credible plan. As investors are a key influence on policymakers, groups of investors, both large and small, working together on policy advocacy can be effective in addressing the systemic risks of climate change.

While forward-looking plans for advocacy around climate policy were harder to find than other elements of investors’ climate action plans, the surveys showed that investors are increasingly doing policy advocacy work. 46% of AIGCC and 48% of IGCC member investors in Australia and Asia made submissions to climate related policy consultations. In North America, 45% of the investors reviewed by Ceres submitted comment letters to the U.S. Securities and Exchange Commission in 2023 in support of rules to enhance and standardize climate-related disclosures by public companies. Moreover, 650 global institutional investors managing more than USD $33 trillion in assets signed on to the 2024 Global Investor Statement to Governments on the Climate Crisis. In this statement, the most comprehensive to date, investors and financial institutions have urged governments worldwide to enact the critical policies needed to free up private financial flows for the just transition to a climate-resilient, nature-positive, net-zero economy.

A specific plan on policy advocacy can help investors unlock investment opportunities and allow investors to take full account of the risks presented by climate change in their decision making to maximize their ability to generate sustainable returns and create long term value in line with fiduciary obligations.

Conclusion

Climate transition plans are becoming the norm across the globe. While the content of the plan differs by investor priorities and strategies, most plans for investors include the key focus areas covered in the ICAPs Expectations Ladder, with the exception of policy advocacy, which is largely a missing component. We anticipate continued focus on the need for corporate and investor transition plans by regulators and policymakers. As such, investors who have already developed their plans will be well positioned to meet emerging regulatory requirements, mandates for transition plans, and disclosure requirements around the world.

A common vision between asset owners and asset managers is also key to developing a climate transition plan. It is crucial that asset owners understand how climate risks and opportunities are being managed within each investment strategy or asset class and engage directly with asset managers to encourage more effective governance, management and disclosure of these issue areas.

The development and implementation of robust and credible transition plans is crucial to assessing systemic risks from climate change and seizing as well as signaling climate investment opportunities. The Founding Partners of the Investor Agenda including Asia Investor Group on Climate Change (AIGCC), CDP, Ceres, Investor Group on Climate Change (IGCC), Institutional Investors Group on Climate Change (IIGCC), Principles for Responsible Investment (PRI) and UNEP Finance Initiative (UNEP FI), will continue to track and support investor progress in this area.