NZC10 Carbon-Neutral Investor Target

The Net-Zero Carbon 10 (NZC10) investor target is for fund managers to better align their investment policies to carbon-neutrality, not just emissions reduction. Few sustainable fund managers challenge company boards on their plans for carbon-neutrality; mainly because they lack a simple, systematic framework. To progress matters, P1 Investment Management devised NZC10.

NZC10 focuses on net-zero emissions - firms can have some CO2 emissions, providing these are reliably offset. NZC10 requires 10 or more of portfolio assets being in firms that:

A. are carbon-neutral or have net-zero emissions; or
B. have realistic strategies using current technologies to achieve net-zero emissions by no later than 2030; or
C. the fund manager is actively engaging with the firms to meet (B).

NZC10 can be implemented by fund managers and easily understood by investors. Six funds with over £2.3 billion of assets from five fund houses have already adopted the target. Carbon-neutrality by 2030 exceeds the Paris Agreement targets allowing participating managers to show leadership.

The fund sector is extremely competitive, encouraging self-reinforcing change as leadership provides marketing advantages, stimulating others to follow suit. NZC10 helps funds demonstrate leadership and creates a cohort of professional investors who systematically engage with company boards to develop 2030 carbon-neutrality strategies. Financial markets allow a few institutional investors adopting NZC10 to promote the transition to carbon-neutrality amongst larger numbers of investee companies.

NZC10 characteristics include:

Actors: NZC10 target sponsor (Quintin Rayer, P1 Investment Management), supporting climate scientists, (sustainable) fund managers, company boards.

Trigger (intervention): NZC10 investment target.

Criticality (system ripe for change): financial markets, investors desiring change.

Feedback dynamics: competitive marketing environment with herding behaviours, underlying investor word-of-mouth. Financial advisors improved product to climate-aware clients. Shared experience between fund managers and company boards.

Timescale and scalability: NZC10 already available, and scalable through investment markets.

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Actor(s)

 

Trigger (intervention)

 

Criticality

 

Feedback Dynamics

 

Timescale and scaleability

 

Resistance

 

Author

Quintin Rayer

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