Asset owners can put processes in place to assess how effective they are in implementing their chosen strategies.
As well as the specific performance indicators suggested within each strategy, there are broader tools for monitoring and reporting, including those outlined below. Further work is needed on how an individual asset owner can assess their contribution towards emissions reductions in the real economy.
The PRI Reporting Framework: From 2016, this will provide for mandatory indicators and voluntary annual disclosure on investor practices on climate change, including measurement, engagement, low-carbon investment and thematic investment. The public Transparency Report generated for each investor that completes the framework can be used in internal reviews. In future years, confidential assessments may include climate change. The PRI’s Reporting & The Report on Progress assesses overall industry progress.
The Asset Owner Disclosure Project: This provides an independent and in-depth assessment of disclosure, covering transparency, risk management, low-carbon investment, active ownership and investment chain alignment.
Balanced score cards: These are well-accepted among Fortune 500 companies, and included in the Value Driver Model work of the UN Global Compact40 and the PRI. An asset owner could adopt a similar approach by developing performance indicators with metrics for:
- Internal understanding, culture and training in relation to climate change;
- Ability and success at working with externally appointed managers on climate change;
- Level of success in investor engagement with companies;
- Level of success in investor engagement with policy makers; and
- Distance from target on established goals, for example on quantitative carbon emissions.
The Investor Platform for Climate Action: In 2015, investors launched this online platform identifying and recording publicly the wide range of actions on climate change being undertaken by the global investor community. It lists investors taking action in four primary action areas:
- Measurement (e.g. carbon footprinting of portfolios);
- Engagement (e.g. with fossil fuel and energy-intensive companies);
- Reinforcement (e.g. with public policy makers); and
- Reallocation (including investment in low-carbon assets and shifting capital from emissions-intensive activities.
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Developing an asset owner climate strategy