Although net-zero investing has become the centre of attention, rising energy prices and regulatory scrutiny of ESG have created a challenging environment for investors. As the world moves towards a low-carbon transition, Neuberger Berman has some considerations for investors to navigate the path to net-zero emissions.
In a recent whitepaper, the investment management firm talks about different phases of investment strategy, starting with assessment and planning. Under this, NB says investors must first consider the scope of net-zero commitments and identify challenges and take a bottom-up approach.
Next up are the ESG declarations within the Investor Policy Statement (IPS) or an Investment Management Agreement (IMA). NB also talks about net-zero investing in the context of strategic asset allocation which can help meet emissions targets, which falls under the implementation strategy.
On whether to implement an active or passive investment strategy, Neuberger Berman lists the positives and negatives of each. The investment management firm adds that investors need to engage with companies that fail to meet net-zero targets.
Another concern is how to approach developed and emerging market economies, where Neuberger Berman says that prioritizing EM climate solutions could have a more significant impact on the overall net-zero transition.
While most points above are applicable to companies who must make mandatory disclosures, NB says that the ESG framework for private markets is still under development.
Lastly, when it comes to reporting, monitoring, and filling potential gaps, the investment management firm talks about carbon credits and the challenges in reporting net-zero emissions.
“While challenges abound, we remain encouraged by the simmering urgency among investors and companies to meet their climate goals and ultimately reduce emissions and the risks they pose to their portfolios, businesses and the planet,” writes Jonathan Bailey, Head of ESG Investing at Neuberger Berman.
View the complete whitepaper here.
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