We must first acknowledge the fact that achieving the goals of the Paris Agreement requires significant, absolute greenhouse gas (GHG) emission reductions. With this in mind, we believe investors must take a company-specific approach, with a focus on real-world outcomes.

Some approaches to alignment with the Paris Agreement focus solely on predetermined annual reductions to portfolio-level emission metrics, such as carbon intensity. However, prioritising such metrics above all else can be counterintuitive. For example, a fund manager could simply hold a portfolio of low-emitting companies, such as software developers, or gradually reduce their stake in the biggest emitter. While progress would look good on paper, this wouldn’t necessarily contribute towards the absolute emission reductions necessary to limit global temperature increases. The same level of emissions would still exist, but they would simply be outside of the fund.

We believe that a far more effective approach to alignment with the Paris Agreement is to focus on the concrete action being taken by individual companies. In particular, investing in companies that have set, or are in the process of setting, ambitious targets to reduce their own emissions, and/or those providing climate solutions that allow others to reduce their emissions. 

You can now read the full whitepaper at the link below