"We are getting very direct questions from our clients. From a fiduciary perspective, we are aligned that if we don't address it, this is a significant financial risk," Mr. Thompson said.
The net-zero initiative sets out nine actions by investment consultants to support the goal of global net-zero greenhouse gas emissions by 2050 or sooner.
The top priority is integrating advice on net-zero alignment into investment consulting services "as soon as practically possible" and within two years. Other commitments include working with asset owners to identify investment risks from climate change, prioritizing emissions reduction toward a target of 50% reduction in global emissions by 2030 or sooner, and assessing and monitoring asset managers.
"We absolutely are expecting our asset managers to understand what that commitment means," Mr. Thompson said.
Consultants offering discretionary asset management services commit to align with the Net Zero Asset Managers Initiative within two years.
In a separate release, the Paris Aligned Investment Initiative Net-Zero Asset Owner Commitment said Monday that it has 40 signatories. With the latest addition of 12 asset owners, the signatories now represent $2.35 trillion in assets.
The net-zero commitment was established in May 2019 by Europe's Institutional Investors Group on Climate Change to help investors transition to net-zero. It now includes AIGCC in Asia, Ceres in North America and IGCC in Australia and New Zealand.
New signatories include Australian industry superannuation fund HESTA, London Pensions Fund Authority, RPMI Railpen and Tesco Pension Investment in the U.K, and in Europe, AP Pension, AP3, AP7, the Church Pension Fund, Elo Mutual Pension Insurance Co,, Ilmarinen Mutual Pension Insurance Co., Lægernes Pension and PenSam.
Signatory asset owners will use a net-zero investment framework to align portfolios with a 1.5 degree Celsius net-zero emissions future, built around five core components. The framework currently covers four asset classes: listed equity, corporate fixed income, real estate and sovereign bonds, but work is underway to expand coverage to infrastructure, private equity, hedge funds and derivatives, the group said in its release.
Karoliina Lindroos, head of responsible investment for Ilmarinen, said in the release that the framework provides "a toolkit for putting climate commitments into practice, and helps us reach our goal of carbon neutral investments by 2035."