Your Target: Net Zero

For investors who seek to align with the Paris Agreement and/or achieve net zero emissions, we have developed tools and solutions designed to help them implement sustainable investment strategies. The frameworks and guidance followed by such investors may seek to achieve net zero emissions by a combination of:

Decarbonizing their portfolio,
Increasing their investment in climate solutions or green technologies,
Increasing their portfolio alignment, and/or,
Improving their reporting and disclosure.

Your Choices: Approaches to Net Zero

Broadly, we see three principal methods adopted by investors to meet their net zero ambitions:

Climate Investment Solutions and Asset Allocation

Investors adopting a net zero strategy may seek to adjust their asset allocation based on
the climate-related risk and return profile of their investments, including by selecting climate-related investment products. Investors can choose from a variety of climate-related metrics and data that can be integrated in the portfolio construction process either directly in the investor’s portfolio or indirectly through investment products selected by the investor. Some metrics are
more backward-looking in nature, while others are more forward-looking. The feasibility and applicability of different metrics in portfolio construction depend on various factors, including data quality and coverage, and are also asset class-dependent.

Investor-Directed Exclusions

Investors may choose to exclude or screen certain investments from their portfolio based on their net zero investment goals. These custom exclusions can be made based on a variety of metrics, such as the volume of CO2 emissions of a company or indirect ownership of companies involved with certain industries. Determining appropriate thresholds for some of these metrics can prove complicated. We can help our clients with the required data and expertise needed to develop these exclusionary screens.

Reporting

For our clients and an increasing number of regulators, accurate reporting is key to ensuring strategy effectiveness. Various metrics such as those outlined by the Task Force on Climate-related Financial Disclosures (TCFD) and a broader range of climate profile statistics are available.

Additional Capabilities

For those clients that have adopted net zero, or who wish to prioritize sustainability and seek to achieve sustainability outcomes, we offer the Sustainability Stewardship Service. This client-driven service provides a dedicated framework for company engagement and specialized proxy voting focused on specific sustainability priorities including climate change.

Disclaimer

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Investing involves risk including the risk of loss of principal.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.

All information is from State Street Investment Management unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The information contained in this communication is not a research recommendation or ‘investment research’ and is classified as a ‘Marketing Communication’ in accordance with the applicable regional regulation. This means that this marketing communication (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research (b) is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.

The returns on a portfolio of securities which exclude companies that do not meet the portfolio’s sustainable strategy criteria may trail the returns on a portfolio of securities which include such companies. A portfolio’s sustainable strategy criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Investment Management’s express written consent.

The above targets are estimates based on certain assumptions and analysis made by State Street Investment Management. There is no guarantee that the estimates will be achieved.

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