Decarbonization is the process through which investors reduce portfolio exposure to GHG-emissions and align their portfolios with the climate economy of the future. There are different approaches to portfolio decarbonisation, which can be achieved across asset classes, including engagement, divestment, as well as techniques such as ‘best-in-class’ and ‘negative screening’. Both active investment management and passive management via the replication of low-carbon or climate-aligned indexes are possible strategies. The aim of the PDC is to centralize, document, and present to Governments, current and future decarbonization action worldwide, across all of these different approaches.
What are the benefits?
When large institutional investors start to engage and/or re-allocate capital on the basis of companies’ GHG emissions, it provides a strong incentive for those companies to re-channel their own investments from carbon-intensive to low-carbon activities, assets and technologies. The PDC is building a critical mass of investors that are developing climate friendly portfolios that will eventually lead to meaningful impacts in reducing GHG emissions.
What is expected of investors that make this commitment?
For asset owners:
An asset owner organization will be accepted as a Portfolio Decarbonization Coalition member as long as:
- It professionally manages money, and
- It has made a carbon-footprinting or any other climate-related disclosure pledge, for instance via the PRI’s Montreal Pledge, and
- It submits written commitment to ‘decarbonize’, within a specific time horizon, a specific fraction of the institution’s assets under management, in line with the Coalition guidelines provided in the FAQs section of the Coalition website; and
- It is willing to have that commitment made public by PDC.
- It is fully and publically committed, at CEO or trustee level, to promoting the Portfolio Decarbonization Coalition and its recruitment activities among peers.
For asset managers:
An asset manager organization will be accepted as a Portfolio Decarbonization Coalition member as long as:
- It submits written confirmation that it already is supporting, or firmly planning to support, at least one asset owner in portfolio decarbonization or similar climate-related capital re-allocation efforts, and’
- It is fully and publically committed, at CEO level, to promoting the Portfolio Decarbonization Coalition and its recruitment activities among peers.
Start the journey
The Portfolio Decarbonization Coalition is open to all asset owners and managers. The journey starts when asset owners and managers complete the Coalition membership documents.
These commitments will create a critical mass of institutional investors – owners of large segments of the global economy – decarbonize their portfolios will send a strong and unequivocal signal to carbon-intensive companies that carbon-efficiency is now center-stage.