Net-zero targets are becoming the norm, but investors are eager for greater policy certainty, according to a new survey by the Investor Group on Climate Change (IGCC), titled Aspiration to Action: insights into investor progress towards net zero.

In this year’s survey investors showed a sense of urgency with the COP 26 meeting in November offering a major opportunity to lock-in a clear global ambition for climate action. A total of 50 participants, representing over AU$3.1 trillion, responded to the survey, which has been carried out for the past 5 years.

This year the number of respondents who have committed to net-zero targets pushed to 40%, from 27% the year prior. The majority are going public with their commitments, and there was strong adoption of interim targets that map milestones on the way to 2050. Setting targets at the portfolio level was still preferred over targets at the asset-class level, likely offering investors greater flexibility.

Adoption of TCFD disclosure has also grown, up to 55% from 38% last year. Other frameworks are seeing greater adoption as well, with models that specifically focus on climate change seeing strong engagement, such as the Paris Aligned Investment Initiative, of which 40% of respondents said they’re now using. However, with climate reporting on the whole lagging expectations, IGCC suggests mandatory reporting will be necessary to drive broader adoption. 

Moving from models, to the specifics of what’s being measured, there was also an uptick in those parties who are assessing scope 3 emissions, pushing to 50% of participants ‘actively considering’ this factor. 

In terms of government policy, there were growing levels of dissatisfaction; 70% of investors highlighted policy uncertainty as a key barrier to investment, up from around 30% last year. 

The New Zealand government has made progress with its mandatory climate risk disclosure regime, as well as revising its 2030 emissions targets. While Australia still lags with no increase in targets to 2030. As the report explains; “The Australian government’s current policies are not a substitute for a coherent national climate policy framework for the entire economy. More credible 2030 emissions targets, a clear goal for net zero emissions by 2050, and the implementation of an investable climate-related financial disclosures regime are needed. A credible national framework to achieve net zero emissions across the economy would provide a greater market signal for institutional investors to accelerate their support for an orderly transition in Australia.”

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