Mercer launches new climate change solution for investors

17 November 2020 Consultancy.uk

As businesses come under regulatory pressure to adapt to a net-zero economy in the coming decades, many investors remain unsure how to adapt their portfolios. Professional services firm Mercer has launched a new solution to help prepare investors to decrease their carbon impact.

Governments around the world are looking to meet the goals outlined in the Paris Agreement, which seeks to limit global warming to 1.5°C, with many putting increased regulatory burdens on companies to help meet this target. In the UK, for example, the UK became the first major economy in the world to pass laws aiming to end its contribution to global warming by 2050. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels.

Such a scenario will require carbon emissions to be balanced by absorbing an equivalent amount from the atmosphere – reaching ‘net-zero’. However, many investors are not yet equipped to invest in a decarbonising economy, and some don’t know where to start. As other nations set out similar targets for their country’s economy, Mercer has launched a new climate change solution to help investors transition to a 1.5°C climate scenario.

Mercer launches new climate change solution for investors

The solution, called Analytics for Climate Transition (“ACT”) will help investors construct climate resilient portfolios on a multi-year timeframe, as 1.5°C requires a 45% emissions reduction by 2030. Offered to Mercer’s investment consulting clients worldwide, ACT will be leveraged to support climate transition strategies across Mercer’s $304.5 billion global assets under management on behalf of its investment solutions clients.

Mercer’s framework and analytics draw on multiple data providers and metrics to assess portfolios across a spectrum of carbon risk, with portfolios ranked from low transition capacity (gray investments) to investments that are low carbon risk/zero carbon already, or are providing climate solutions. The majority of companies in investor portfolios fall somewhere in between the two sides. This will help investors transition their portfolios to take on the challenges of managing climate risk, in their endeavor to meet return objectives while staying on target for a net-zero outcome.

Kate Brett, Mercer’s European Head of Responsible Investment, explained, “As investors increasingly seek to set net zero targets and align their portfolios to a 1.5°C global warming outcome, it is vital that they are equipped with the necessary tools and analysis to do so. The analytics and advice builds on Mercer’s pioneering climate scenario analysis and aims to support investors in setting net zero targets, outlining a pathway to net zero and measuring their progress as the transition progresses.”


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