BlackRock and several other major asset managers have become strategic partners of the Inevitable Policy Response (IPR), a project that aims to prepare institutional investors for the risks and opportunities associated with acceleration in global climate policy.
BlackRock, BNP Paribas Asset Management, Goldman Sachs Asset Management, New Forests, Nuveen and Robeco will support IPR financially as well as provide input into the programme. Fitch Ratings has also joined as a strategic partner.
According to IPR, it created a strategic partners programme last month following increasing engagement and use by the investment community, for “leading financial institutions who are more deeply involved in establishing IPR as a reference standard for the climate transition”.
The support being provided by the strategic partners comes on top of in-kind support from the Principles for Responsible Investment (PRI), which commissioned IPR in 2018.
It is used as an input into decision-making by many asset owners and asset managers, with IPR saying that more than 170 investors use it to inform their PRI TCFD reporting.
IPR contends that governments will be forced to act more decisively than they have thus far, leaving financial portfolios exposed to significant transition risk. It sees its thesis as having been borne out by actual policy developments and reflected in financial markets.
Plenty in store
The onboarding of BlackRock and the other market-based strategic partners comes as IPR prepares release an updated Forecast Policy Scenario (FPS) report later this year, with a focus to 2030, and additional assessments to 2050. In March it revealed an updated forecast for climate policy, which the updated FPS will draw on.
For the first time, IPR will this year also be releasing a 1.5°C Required Policy Scenario, building on the IEA’s recently published net-zero scenario, by deepening analysis on policy, land use, emerging economies, negative emissions technologies, and value drivers.
Margaret Anadu, global head of sustainability and impact at Goldman Sachs Asset Management, added: “Developing climate scenarios useful for asset managers is something we can best do together as an industry.
“The IPR framework gives us what we need: more granular outputs across transition-critical industries, an open-source framework, and narratives based on both what’s ambitious and what’s likely.”
“The uncertain pace of the net-zero transition poses important challenges for investors as we assess associated risk, opportunity, and volatility,” said Paul Bodnar, global head of sustainable investing, BlackRock.
“We are delighted to join IPR in this effort to develop scenarios that will help our clients and stakeholders better understand how this transformation will unfold in practice for sectors such as energy supply, heavy industry, transport, and land use.”
BlackRock carried out its first climate-related scenario analysis exercise in 2020, and according to its 2020 TCFD report it used an adapted version of the IPR for this.
In other climate-related investment management news:
- State Street Global Advisors has launched a new climate transition index equity fund using assessments from the Transition Pathway Initiative (TPI) and data and analysis from FTSE Russell. Launched for UK investors, the fund is said to offer them “a more sophisticated path to drive change than disinvesting from entire sectors” while also addressing transition risk. It has secured seed investment from Kempen Capital Management.
- Allianz GI has announced it will implement a global exclusion policy that includes a dedicated coal policy. The asset manager previously only had coal exclusion thresholds for its dedicated range of sustainable strategies, but will now follow that policy across all funds. It will not invest in companies that derive more than 30% of their annual revenue from thermal coal extraction, and companies where more than 30% of their electricity production is based on coal.
- HSBC Asset Management has launched a Paris-Aligned UCITS exchange-traded fund, which will track an MSCI index. The fund is its first such ETF.