New Guidance: The Net Zero Investment Framework 2.0 (“NZIF 2.0”)

25 June 2024
The Net Zero Investment Framework 2.0 (“NZIF 2.0”) is the latest iteration of the most widely used resource by investors to develop their individual net zero strategies and transition plans.
Landscape

Download NZIF 2.0

  • NZIF 2.0 is the most up to date and comprehensive net zero investor guidance based on three years of practical implementation experience.
  • NZIF 2.0 includes updates to guidance on several asset classes, as well as some revised target terminology and criteria.
  • NZIF 2.0 is a gateway to additional support, guidance and the latest thinking convened by AIGCC, Ceres, IGCC and IIGCC to help investors in their considerations around how to operationalise and make progress against their individual net zero goals.

The Net Zero Investment Framework (‘the NZIF’), the most widely used resource by investors to develop their individual net zero strategies and transition plans, has been updated and published as ‘NZIF 2.0’.  

Key updates 

Developed following extensive consultation with over 200 investors, NZIF 2.0 is an evolution of the original framework and guidance. However, important updates include: 

  • Financed emissions: A repositioning of the new Portfolio Decarbonisation Reference Objective clarifies how it was originally envisaged to support portfolio alignment. The update intends to better support the NZIF’s emphasis on ‘financing reduced emissions’ rather than ‘reducing financed emissions’.  
  • Investor experience has shown that focusing on financed emissions alone can have perverse outcomes, such as dissuading investment in climate solutions at a time when the mobilisation of capital to finance these areas should be encouraged.   
  • NZIF 2.0 therefore reaffirms one of the NZIF’s key positions: that financed emissions don’t tell the whole story. While important, financed emissions should not be used as a single metric to create year on year emissions reduction targets.   
  • Asset class and thematic guidance: There is new guidance for Sovereign Bonds, Real Estate, and Private Debt, in addition to the inclusion of guidance published after the NZIF launched in 2021 for Infrastructure and Private Equity.  
  • Other notable improvements include new emissions performance criterion for listed equities and corporate fixed income, and new certificate deposits guidance to support net zero cash management. 

NZIF 2.0 also summarises best practices shared by investors, collected from three years of implementation, converting them into more than 40 potential actions an investor can choose to take. 

Overall, NZIF 2.0 aims to make life easier for investors to consider risk and return in their individual contexts by bringing together the wide range of resources available to them all in one place. Information is now more accessible, intuitive and coherent. 

Interested to learn more about NZIF 2.0 and how it can help better guide your net zero strategies and transition planning? Contact our Program Manager, Investor Practice – Lisa.Caripis@igcc.org.au.

Investor reflections 

Nathalie van Toren, Head of Responsible Investment, NN Group and Co-Chair of the Steering Group for the Paris Aligned Investment Initiative, said: “The Net Zero Investment Framework has been incredibly valuable for any investors wanting to develop and implement their individual net zero strategy and transition plans. At NN Group, the NZIF was the natural starting point when we went about setting our initial targets to underpin our net zero strategy. By bringing the latest thinking and guidance together in one place, NZIF 2.0 will undoubtedly continue to play an important role in our net zero journey and I congratulate everyone involved in its development.” 

Adam Matthews, Chief Responsible Investment Officer for the Church of England Pensions Board and Co-Chair of the Steering Group for the Paris Aligned Investment Initiative, said: “The Net Zero Investment Framework provides an essential framework that is credible and rigorous to practically operationalise investors’ climate commitments. As the Church of England Pensions Board, the NZIF is key to delivering on our own net zero commitment and to do so in a comparable way with peer investors. We welcome the continued evolution of the scope and coverage of the framework. It is essential that as our understanding of best practice evolves and we continue to learn lessons from implementation, that the frameworks underpinning investor action and implementation evolve too.” 

Takeo Omori, Head of Sustainable Investment Group, Asset Management One, said: “We adopt the Net Zero Investment Framework to develop our portfolio climate goals, as it provides a framework for developing a credible strategy and plan to reach net zero, aligned with net zero scenario. The NZIF framework provides a useful model, particularly in terms of its forward-looking emphasis and its recognition of asset class differentiation, suitable across a range of geographies. We will continue to draw on NZIF 2.0 as it remains a vital industry resource to inform our net-zero alignment strategy at the portfolio level.” 

About the Net Zero Investment Framework

Initially developed by IIGCC and launched in 2021, the NZIF was a key output of the Paris Aligned Investment Initiative (PAII), an investor-led forum to support investors to align their portfolios and investment activities to the goals of the Paris Agreement. The PAII is delivered by four investor networks: AIGCC, Ceres, IGCC and IIGCC. 

The NZIF – now a global reference framework for investors in all regions – is the most widely used resource by investors to develop their individual net zero strategies and transition plans. If net zero is the destination, then the NZIF is a framework that can assist investors in developing their own credible strategy and plan to reach the destination. Over 200 investors have used the NZIF, either fully or partially, to support their NZAM or PAAO commitment – although its reach and use extends to investors outside of these initiatives too. 

The NZIF offers guidance for most of the traditional asset classes in an average investor portfolio covering: listed equity and corporate fixed income, sovereign bonds, real estate, infrastructure, private equity, and private credit. 

The NZIF does not tell investors what to do. While it lays out the landscape of potential options, the NZIF is agnostic about how investors choose to implement their proposed plans to manage their own individual portfolios. As independent fiduciaries, with their own strategies, policies and practices, based on their own best interests and in line with their overarching fiduciary duties to their clients and beneficiaries it is for investors to individually decide how to implement their own plans.  

The NZIF is not a commitment platform. While used by investors that have made individual net zero commitments, the NZIF is not an initiative – it is a resource to support investors in their considerations and in the development of their own net zero strategies and transition plans. 

Investor networks 

Stephanie Pfeifer, CEO, IIGCC: “Based on three years of practical experience, NZIF 2.0 incorporates the latest guidance on net zero target setting and the latest thinking on the levers available to investors to meet their net zero goals. For investors looking to identify and manage climate-related transition risks and opportunities in their portfolios, the Net Zero Investment Framework has cemented its position as the number one resource to accompany them along their journey.”  

Rebecca Mikula-Wright, CEO, AIGCC and IGCC: “Investors are under all kinds of pressure to show their climate commitments are credible, are translating to real world action, and support good returns for beneficiaries. The Net Zero Investment Framework is the best practice tool to guide investment practice and give trustees confidence that climate risks and opportunities are being properly addressed.” 

The Rev. Kirsten Spalding, Vice President of Ceres Investor Network, Ceres: “Investors who have made net zero commitments can find deep dive guidance and flexible approaches to implementing their portfolio targets in the Net Zero Investment Framework. It is a ‘go to’ resource for all investors who seek to address climate risks and opportunities across every asset class.”