Is Net Zero the Next Big Thing in SRI?
A Q&A on going beyond “low carbon” in socially responsible investing with Rupert Edwards, our Senior Advisor on Carbon & Finance, and Genevieve Bennett, our Director of Communications.
Genevieve Bennett: We saw BlackRock chief Larry Fink’s annual client letter this month calling the climate transition a “historic investment opportunity” and asking companies to disclose how they’re planning to move their business models to compatibility with a net-zero emissions economy. BlackRock is the biggest asset manager in the world, so their recent pressure on climate exposure has gotten a lot of attention. But they are really the tip of the iceberg in terms of a shift we’ve seen recently in institutional investors assessing climate risks in their portfolios.
Your new paper looks at retail investment as the next frontier – this idea that nonprofessional investors also want net zero carbon investment options, and what those financial products could look like.
Rupert Edwards: Right. There’ve been some major shifts underway in the last few years. The huge growth in Socially Responsible Investment; the rapid evolution of climate risk metrics and lower investment carbon strategies, which you’ve alluded to, driven partly by SRI trends, but also by regulators and central banks. And, in the real economy, the corporate focus on transitioning to net-zero under pressure from policy, regulators, and market forces.
The logical next step is that many retail investors will seek to go beyond modest shifts in the carbon intensity of their savings portfolios and look to achieve net zero, by using offsets as a supplement to lower carbon investments.
Investment managers and investment platforms could start to offer savers opportunities to offset the carbon footprint of their portfolios. But, even if they are slow to do so, we are starting to see the emergence of consumer-friendly financial technology platforms that will make it relatively easy for retail investors quantify their carbon impacts.