The New CFA Institute Treatise On Net-Zero Investing: The Missing Part Of The Story

“Entrenched systems and behaviours in the finance industry are hindering investors’ ability to adequately consider climate risk, says Marg Franklin, chief executive of the CFA Institute, which has just launched foundational research that examines practical ways for the industry to tackle climate risk. “Net Zero in the Balance: A Guide to Transformational Thinking” aims to help the investment industry understand and fully implement net-zero investing.”

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“CFA Institute seeks to support those considering net-zero investing by developing more thought-leadership and educational offerings in this area. We welcome diverse perspectives….”.

Marg Franklin, CEOCFA Institute

“For generations, we have defined a corporation as a business run by a capitalist elite, which uses its accumulated wealth to own the means of production and exercise economic power. That is no longer the reality. In the 21st Century, our most desired goods and services are not stacked in warehouses or container ships: they appear on your screen, fit in your pocket, or occupy your head. But even as we consume more than ever before, big business faces a crisis of legitimacy….”

Sir John Kay, Fellow of the British AcademyFounding Dean, Said Business School, Oxford University

The New CFA Institute Treatise on Net-Zero Investing

The new 55-page CFA Institute treatise on net-zero investing authored by Roger Urwin with input from 23 expert contributors is a serious piece of work integrating climate change into the investment processes of long-term investors. Here are the key messages of “Net Zero in the Balance: A Guide to Transformational Thinking” as set out in its Executive Summary: 

• The future impact of climate change on businesses and capital markets is likely to be material, and hence this risk must be addressed.
• Building resilience to adverse climate outcomes is possible and hence should be pursued.
• Transformational leadership and organization change will be required to make a serious commitment to the global goal of net-zero emissions.
• A key focus must be to deepen beliefs about, and understanding of, climate change. This will require attracting new expertise and talent.
• Another focus is to build collaborative networks to accelerate learning and doing.
• Key innovations will include systems thinking, balanced score cards, total portfolio thinking, universal ownership theory, and stewardship.
• Triple mandates for asset owners are to achieve the net-zero emissions goal, to meet all legislative/regulatory/coalition requirements, and to still achieve the highest possible risk-adjusted investment returns.