LCP has increased expectations on investment managers when it comes to climate change goals and believes they should be actively advocating for changes to government policy, financial markets and companies that increase the chances of reaching net zero global emissions no later than 2050.

Since 1 April 2022, managers have needed to be signatories of the Net Zero Asset Managers initiative for their products to be eligible for LCP to give them the highest rating. LCP has now updated their expectations to ensure that investment managers are doing their part to help mitigate systemic climate risk and not just focus on risks to individual assets.

Crucially, LCP believes that investment managers should be helping to reduce real-world emissions and not just focusing on reducing portfolio emissions.

That means engaging with companies, leaseholders and other stakeholders to get real emission reductions, as well as seeking profitable investments in companies or other assets that assist with emissions reduction or removal.

LCP expect that investment managers should be doing this alongside two other key things:

• Aligning portfolios with net zero pathways
• Encouraging portfolio companies or other investee entities to set and meet net-zero targets.

Aaron Punwani, LCP CEO, commented: “Climate risk is financial risk, and at LCP, we firmly believe that limiting global average temperature rises to 1.5°C is in the best interests of our clients, our industry and our collective future.

“To get there, we need to achieve net zero global greenhouse gas emissions no later than 2050. Investment managers need to actively engage with companies and help them align with net zero goals. Simply selling off portfolio assets that are emissions heavy will only serve to kick the can down the road and won’t help real-world emission reduction.”

You can read the letter detailing the new expectations for investment managers here.