Frequently Asked Questions

General

1. What is the Investor Climate Action Plans (ICAPs) Expectations Ladder and Guidance? 

The ICAPs Expectations Ladder summarizes key actions investors can take to tackle the climate crisis in the four focus areas of the Investor Agenda: investment, corporate engagement, policy advocacy, and investor disclosure, with governance as a cross-cutting theme. It was developed by the Founding Partners of the Investor Agenda – AIGCC, CDP, Ceres, IGCC, IIGCC, PRI and UNEP FI. 

The Expectations Ladder is inclusive and designed for all investors, regardless of where they are on their climate change journey. That is why the Expectations Ladder sets out a summary of encouraged actions over four tiers from those beginning to think about climate (Tier 4) to the net zero standard-setters (Tier 1). It allows investors to begin to assess where they currently sit on their net zero journey and to identify the actions they might take to strengthen their approach. 

Expectations set out in the Ladder assist investors in:    

  1. Assessing their current approach to managing climate change risk and opportunity  
  2. Publishing a standalone ICAP (often referred to as a climate transition plan or a net zero transition plan)  
  3. Embedding elements of the ICAPs into their climate change strategies, investment beliefs, transition plans, and disclosures  
  4. Communicating their current activities and plans to stakeholders 

The ICAPs Guidance has also been developed to enable investors to interpret the ICAPs Expectations Ladder. It helps investors self-assess where they are on the ladder to understand the specific climate actions they can take to strengthen their approach and make further progress. The Guidance includes a set of resources to inform the development of ICAPs. This is not intended to be a comprehensive list of all tools and guidance but rather indicate the resources available. 

2. Are investors expected to publish their ICAPs? 

Investors who are signatories to the Net Zero Asset Managers initiative and Paris Aligned Asset Owners have committed to publishing their climate action plans within the agreed scope of these initiatives. Other investors can use the ICAPs Expectations Ladder to develop a climate action or transition plan and are encouraged to publish it on a voluntary basis. There is no standalone ICAPs reporting requirement. 

Outside of the net zero initiatives, investors developing ICAPs are encouraged to publicly disclose their ICAPs and indicate where they are across the expectations ladder for greater accountability and transparency in the market. Additionally, investors are encouraged to use other public reporting – depending on the investor, these may include integrated reports, TCFD (Taskforce on Climate-related Financial Disclosures) reporting, the PRI signatory reporting and assessment process, and the CDP Financial Services Climate Change Questionnaire – to report on how they implement the various elements of the ICAPs Expectations. 

3. Do asset managers and asset owners have the same obligations? 

The ICAPs Expectations Ladder is designed to be relevant to all institutional investors, including asset owners and both active and passive asset managers. The approach that different institutional investors take to tackle climate change will be driven by factors such as their size, their position in the investment chain, their legal duties and obligations, the needs and interests of their clients and beneficiaries, asset allocation and investment strategies, and their investment time horizons.  

The ICAPs Expectations Ladder recognizes that certain elements may not be relevant for each investor (e.g., the investor might not have listed equity investments, the investor may not delegate investment management). An investor may decide that a specific action is not relevant or appropriate to its net-zero strategy. 

4. How do Investor Climate Action Plans (ICAPs) Expectations Ladder align with established net zero frameworks? 

ICAPs Expectations Ladder and Guidance was designed to bring together expectations from several existing resources, including the Science Based Targets initiative (SBTi) and the work of the net-zero alliances, particularly the Net Zero Investment Framework (NZIF) and the UN-convened Net Zero Asset Owner Alliance’s Target Setting Protocol (TSP). ICAPs Expectations in Tiers 1 and 2 draw heavily from these frameworks to set out high-level actions for investors across key focus areas which can be brought together to create a climate action plan or plans (e.g., transition plan). With the ICAPs Expectations Ladder update, the references and alignment to NZIF and TSP will become more explicit.   

As noted above, ICAPs Expectations Ladder and Guidance only sets out expectations at a high-level. To implement the actions in the Ladder, investors will need to refer to detailed guides such as NZIF and TSP. These detailed frameworks are signposted in the ICAPs Guidance. As such, net zero investors can identify high-level actions as they develop their own ICAPs but should expect to refer to detailed frameworks such as NZIF and TSP to implement these actions.   

Understanding The ICAPS Expectations Ladder And Guidance Framework

5. How does an investor self-assess progress across the Tiers? 

Across each of the ICAPs focus areas, there are underlying sub-focus areas that outline recommended actions for investors. To achieve a certain tier in a sub-focus area, an investor must have already implemented most or all the expectations of that tier. 

The recommendation is that investors use the Ladder to meet most or all the expectations in a Tier before they move to the next Tier. The ICAPs Expectations Ladder recognizes that certain elements may not be relevant (e.g., the investor might not have listed equity investments, the investor may not delegate investment management) or the investor may decide that a specific action is not relevant to or appropriate to its net-zero strategy. For that reason, it is only expected that an investor meets the recommendations and expectations that apply.  

In practice, investors may not use the Ladder in such a linear fashion. Some investors may have already completed actions across Tier 1 in a given focus area but not the lower tiers, for example they might already have a proxy voting policy but do not engage with companies. In these cases, the Ladder may be used as a checklist of climate action recommendations, regardless of the Tiers. 

The Founding Partners of the Investor Agenda recommends that organizations regularly review targets and approaches in line with the latest guidance, available data and approaches in the market. 

6. Should Tiers be assessed for each focus area or on an overall basis? 

Investors should assess their Tier within each focus area separately, as the investor might sit in different tiers across each of the focus areas. For example, an investor may be Tier 2 on Investment, Tier 2 on Corporate Engagement and Tier 1 on Policy Advocacy. The Founding Partners of the Investor Agenda considers the gold standard ICAP to be Tier 1 across all the focus areas, as well as publicly disclosed. 

7. With the latest additions to the ICAPs Expectations Ladder, are investors expected to reduce their tier if they now do not meet all the sub focus areas in a given section? 

As above, the expectation is that investors meet most or all of the requirements in a Tier before they move to the next Tier. Investors should regularly review and re-assess their ICAPs and where they stand within each of the tiers using the updated ICAPs Expectations Ladder and Guidance. 

For more detail on assessing Tier criteria, see questions 5 and 6.  

8. What should an investor do if a methodology is not available? 

As a general rule, investors can consider that they meet the requirements for a particular Tier when they have taken the specified action for all of the asset classes, sectors or geographies where appropriate tools and methodologies are available. As with other aspects of the Expectations, they should be prepared to identify those asset classes, sectors, or geographies where progress is limited by the absence of appropriate tools or methodologies. Investors are encouraged to contribute to the development of methodologies. 

Net zero performance assessment, net zero scenario analysis, climate change risk assessment and net zero reporting are all evolving disciplines. There are areas where considerable progress has been made and there are other areas where robust methodologies have yet to be developed. 

9. Will reporting against the TCFD reporting requirements be sufficient to enable an investor to meet the expectations in the ICAPs Expectations Ladder? 

There is significant alignment between the TCFD requirements and the ICAPs Expectations Ladder. However, the ICAPs Expectations Ladder’s Investor Disclosure focus area recommends that investors check that the actions under this focus area have been included in TCFD disclosures. For example, the TCFD does not explicitly require investors to report on their policy advocacy or on how they integrate just transition principles into their decision-making. 

10. What actions do ICAPs set out regarding investment in fossil fuels? 

ICAPs encourage investors to prioritize engagement with fossil fuels assets in their portfolios to achieve real economy emissions reductions, in line with best practice guidance set out by leading investor net zero initiatives such as NZAOA, NZAM, PAAO and GFANZ. Tier 1 actions in the Investment focus area include the expectation to phase out, in collaboration with stakeholders including investee companies and affected communities, all unabated fossil fuels by ensuring: 

  • portfolios align with goals to ensure unabated coal-based power generation is phased out by 2030 in OECD countries and by 2040 in non-OECD countries,  
  • existing investments in unabated coal in the portfolio adopt phase out plans by 2030 or sooner, 
  • an end to investment in new fossil fuel infrastructure assets, or exploration of new oil and gas fields/expansion of oil and gas reserves, whose purpose or ultimate emissions are not aligned with the IPCC’s no or limited overshoot scenarios, the One Earth Climate Model (c), or the IEA’s Net Zero Emissions by 2050 Scenario, 
  • direct stakeholder engagement for all phase out and/or abatement plans including affected communities, workers, and consumers to ensure access to energy, and 
  • consideration of opportunities to invest in alternative, renewable energy sources. 

11. How should investors set targets? 

Target-setting for investor climate action should focus on reducing GHG emissions in the real economy consistent with the best available science. For investors this may include a range of target types. The Founding Partners of the Investor Agenda endorses four initiatives that provide target setting methodologies and guidance: 

12. What is meant by intermediate targets? 

Net zero targets are usually defined by reference to 2050. Intermediate targets are intended to allow the investor and stakeholders to track progress towards these long-term targets. As a rule of thumb, the Founding Partners of the Investor Agenda would expect a long-term net zero target to be supplemented by shorter-term and intermediate targets set at five yearly intervals. 

13. If an investor makes and PAAO/NZAM/NZAOA commitment, does that mean that they meet all Tier 1 actions across focus areas?   

Many investors have already made climate commitments, including hundreds of investors who committed to align their investments with net zero emissions, through the Paris Aligned Asset Owners, the UN-convened Net Zero Asset Owners Alliance, and the Net Zero Asset Managers initiative. These commitments seamlessly integrate with the highest level of action (Tier 1) within the ICAPs Expectations Ladder when developing and publishing ICAPs, because these initiatives are run by various Founding Partners of the Investor Agenda. However, as there are multiple sub-focus areas within each section, investors should self-assess that they have already implemented most or all the expectations of that tier. For more detail on sub-focus areas see question 6 above. 

14. How does the ICAPs Expectations Ladder relate to the Glasgow Financial Alliance for Net Zero (GFANZ)? 

The Investor Agenda Founding Partners are actively engaged with GFANZ. 

GFANZ guidance on Financial Institution Net Zero Transition Plans and the ICAPs Expectations Ladder and Guidance are complementary guides. GFANZ’s Guidance on Financial Institution Net Zero Transition Plans has a pan-sector approach that describes best practice principles for all financial institution types. The ICAPs Expectations Ladder and Guidance is designed for investors, focusing on the specific considerations for asset managers and asset owners. The ICAPs Expectations Ladder and Guidance and the GFANZ Guidance are well aligned across common topics and understanding of best practice. This is also demonstrated by the fact that the ICAPs Expectations Ladder and Guidance cites GFANZ resources and, in turn, there is an ICAPs case study in the GFANZ guidance. 

15. Why has the ICAPs Expectations Ladder been updated? 

The ICAPs Expectations Ladder was updated in July 2023 to ensure ICAPs remain at the forefront of best practice for investor climate action. The Founding Partners of the Investor Agenda have updated the Expectations Ladder to ensure alignment with new guidance from the investor net zero alliances, GFANZ, the UN Secretary-General’s High Level Expert Group’s Integrity Matters report, the latest Race to Zero criteria and evolving transition plan mandates in various regions of the world. This ensures that ICAPs maintain robustness in driving momentum on climate action and are regularly aligned with the newest approaches and science. 

16. Deforestation actions feature in the (July 2023) update of the ICAPs Expectation Ladder, why is it in investors best interests to act on deforestation at an early stage within their climate transition?  

Deforestation has significant impacts on both climate and nature. By protecting and restoring forests around the world, we can achieve 18% of the emissions cuts needed by 2030 to prevent the worst impacts of climate change. Ending deforestation is essential to meeting net zero targets and investors should include deforestation within their climate transition plans. Industry leaders, such as GFANZ co-chairs and vice-chairs call for action on deforestation noting that transition plans that lack objectives and clear targets to eliminate and reverse deforestation are incomplete.  

Redirecting finance away from economic activities that destroy nature and towards businesses, supply chains and solutions that protect, manage and restore both nature and climate leads to a clearer, more effective path to net zero and financial institutions should make action on deforestation a focus with the ultimate ambition of eliminating it from portfolios as part of a sustained engagement process that also looks to scale investments in nature-based solutions.  

In turn, investors who are early actors on deforestation can prepare for forthcoming regulations and stand up to public scrutiny. 

17. Where can I find examples of published ICAPs and how can I take part? 

Investors looking for examples of multi-Tier and regionally diverse ICAPs can access case studies on the Investor Agenda website. If you are an investor that is interested in developing or highlighting your ICAPs, contact us at info@investoragenda.org.