Investor briefing: Institutional investor action on climate risk as the world approaches the 1.5°C limit of the Paris Agreement

Drawing on recent years of practice, it proposes a renewed focus on proven levers of action and increased engagement with policy makers to enable a timely transition to net zero. It will hold interest to asset owners, managers, and policy makers in all regions seeking to understand how investor action can evolve to keep pace with a rapidly changing profile of climate risks.

Key insights from this paper include:

• Climate risks have been underestimated and now threaten investors’ core business. Increasing evidence shows how physical climate impacts are affecting assets’ values. Transition risks are expected to intensify as governments respond to worsening losses and impacts. The latest climate science now raises the prospect of an acceleration in warming if 1.5°C is passed, with permanent changes in the Earth system posing systemic threats to the continued viability of the financial sector and the global economy more broadly.
• A global transition response is now underway, albeit unevenly: Investments in renewables reached a record $2.1 trillion in 2024, and coal growth slowed to its lowest in 20 years. The global transition response is progressing unevenly, especially as new political and economic volatility threatens to impede progress towards decarbonisation in some regions.
• In an era of disruption and uncertainty, investors can adopt a strategic ambition aimed at stabilising temperature rise at or below 1.5°C to avoid the most catastrophic climate outcomes and financial risks. A long-term focus on climate-related risks and transition opportunities can position investors to safeguard beneficiary interests in a rapidly changing world. However, investors could be forced to recalibrate investment strategy and near-term net zero targets if ineffective government policy further delays real-world decarbonisation.
• Investors can identify growth opportunities in the transition while seeking new information on corporate transition planning. Climate solutions, transition, and adaptation finance offer opportunities for investors, especially when supported by policy incentives. While corporate engagement has limits, investors can gain insights into how companies plan to generate long-term value in a disrupted future with heightened risks.
• Now and in the years ahead, policy engagement on climate will be one of the most critical levers for investors seeking to manage systemic risks and safeguard the long‐term interests of beneficiaries. Investors can benefit from positioning and resourcing climate-related policy engagement as a core component of their investment strategy, ensuring that proactive engagement is based on positions aligned with their long-term goals.
• PRI offers a wide range of opportunities through which signatories can strengthen their policy engagement efforts and build the necessary wider capabilities to manage the risks and opportunities in the transition to net zero in the critical years ahead.

Download the briefing in full below.