Institutional Investor Group on Climate Change (IIGCC)

Information presented in this profile is for reference only. The Climate Action in Financial Institutions Initiative does not guarantee as to the exhaustiveness of this information and invites you to contact the Secretariat (contact@mainstreamingclimate.org) if you wish to propose any modifications.

By including this profile, the Initiative, its Supporting Institutions and the Secretariat do not endorse the activities described below nor the guidance and information provided in this profile.

 

Last updated: July 2018

Website: www.iigcc.org/

Contact: Stephanie Pfeifer (Chief Executive), spfeifer@iigcc.org

Summary: The Institutional Investors Group on Climate Change (IIGCC) is a platform for European institutional investors launched in 2001. The IIGCC pursues its objective of contributing to a low carbon economy by engaging with investors, companies and policy-makers on different working areas, including climate-related risks. As of April 2018 IIGCC has 152 members with €21 trillion in assets under management.

What are the objectives of the initiative?

“IIGCC’s mission is to mobilise capital for the low carbon future by amplifying the investor voice and collaborating with business, policymakers and investors.”[1]

“IIGCC pursues its mission through two strategic objectives:

  1. Changing market signals by encouraging the adoption of strong and credible public policy solutions that ensure an orderly and efficient move to a low carbon economy, as well as measures for adaptation.
  2. Informing investment practices to preserve and enhance long-term investment value.”[2]

IIGCC’s activities also address the implementation of the Paris Agreement by actively following up, for example, with the work of the Task-Force on Climate-related Financial Disclosures (TCFD) and the European Commission’s High-level Expert Group on Sustainable Finance (HLEG).

Who launched it? Who is participating?

As of April 2018 IIGCC has 152 members with €21 trillion in assets. Membership “is open to institutional investors, including asset owners and asset managers as well as other financial service organisations, subject to IIGCC board approval”.[3]

Why has this been put into place?

The key concept explaining the creation of the IIGCC is collective influence: “IIGCC brings investors together to use their significant collective influence to engage with policymakers on national, EU and international regulations which will accelerate the shift to a low carbon economy.”[4]

What are the main work streams/areas of work?

The IIGCC has five different work programs:

  • Policy: “develop and communicate investor positions […] to support a shift in favour of less carbon-intensive investment”[5]
  • Climate Solutions: “help investors identify, and to the extent possible, quantify the strategic implications of policy measures and physical risks to long-term investments”[6]
  • Corporate: “facilitates collaborative investor engagement with companies in key sectors on their strategies to develop carbon risk resilience and patterns of activity that help drive a smooth transition to a low carbon economy”[7]
  • Property: “aims to engage with policymakers and other stakeholders to ensure that considerations of climate change and its implications are integrated into the management and decision-making process for property investment portfolios”[8]
  • Global: “IIGCC collaborates with regional investor networks and other organisations to deliver shared international initiatives on climate policy and other concerns of common interest.”[9]

In 2017, IIGCC replaced its Investor Solutions Programme with “a larger and more in-depth Investor Practices Programme”[10] designed to help asset owners and managers better assess and manage both climate risk and opportunity, and also to report on their actions more effectively. It will focus on the implementation of the Task-Force on Climate-related Financial Disclosure (TCFD) recommendations and will be structured around the three following areas:

IIGCC’s new Investor Solutions Programme will be chaired by Russell Picot, Chair of the HSBC Pension Scheme and Special Advisor to the FSB Taskforce on Climate-Related Financial Disclosures (TCFD).

What are outcomes of the initiative linked with the 5 Principles?

IIGCC is seen as an important voice for institutional investors on climate change, working with this community to better integrate climate change into their activities. They are also active in other initiatives and networks:

  • Jointly with other investor initiatives, IIGCC launched the Investor Platform for Climate Action (also known as the Investor Agenda)
  • IIGCC is one of the five investor groups behind Climate Action 100+
  • IIGCC is also part of the Global Investor Coalition on Climate Change

Have intermediate or final reports / guidance been issued?

Annual reports on progress of IIGCC’s working programs:

Policy developments such as the Paris Agreement and the EU HLEG on Sustainable Finance have resulted in reports from working programs:

  • Improving the pricing of risk: Aligning the EU financial system and climate change (2016) – “The costs and benefits of the low-carbon transition and the orderliness of the change, will depend on how well the financial system and the real economy anticipate and encourage the shift.”
  • Aligning Europe’s financial system with the Paris Agreement (2017) – “This paper is based on IIGCC’s response to the consultation on the Interim Report of the EU’s High-Level Expert Group on Sustainable finance. It sets out IIGCC’s views on priority policy areas for the EU to focus on over the coming months and years within the domain of sustainable finance. This paper should not be interpreted as exhaustive; IIGCC’s position will be adapted and updated over time.”
  • 2016: From climate commitments to implementation – “Guide to IIGCC’s 2016 programmes and activities, featuring key policy interventions, corporate engagement initiatives and investor workshops on climate solutions.”
  • 2015: A Defining year for climate action – IIGCC’s programme plan for 2015 with resources for addressing the five investor action points established in the 2014 Global investor statement on climate change.”

Guidance for investors:

Calendar and milestones

Associated Supporting institutions of the Climate Action in Financial Institutions Initiative being a member of IIGCC:

[1] http://www.iigcc.org/about-us

[2] Ibid.

[3] http://www.iigcc.org/membership/benefit/application .

[4] http://www.iigcc.org/membership

[5] http://www.iigcc.org/programmes/programme/policy

[6] http://www.iigcc.org/programmes/programme/climate-solutions

[7] http://www.iigcc.org/programmes

[8] Ibid.

[9] Ibid.

[10] http://www.iigcc.org/files/publication-files/IIGCC_Annual_Report_WEB_low_res.pdf

Links with the 5 Voluntary Principles for Mainstreaming Climate Action

This section aims to support discussions on the implementation of the 5 voluntary Principles for Mainstreaming Climate Action. Information provided in this section is for reference only; the Climate Action in Financial Institutions Initiative, its Supporting Institutions and the Secretariat do not endorse the activities nor the guidance and information provided in this section.

The IIGCC report Financial Institutions taking action on Climate Change underlines a need for financial institutions to assess climate-related risks.

In this report, the IIGCC discusses pros and cons of climate stress-tests:

“A growing number of EU policy-makers have recently called for pension funds to conduct climate stress-tests. We support this in principle and await the recommendations of the Taskforce on Climate-Related Financial Disclosures in this regard. The ability of pension funds to conduct stress-tests will be contingent in large part upon disclosure of climate risk by underlying companies and by the asset managers with whom pension funds invest, as well as the availability of agreed methodologies and appropriate staff, financial resources and clean data to conduct tests. Some asset owners have started to conduct basic stress-testing of the robustness of strategic asset allocation and economic sector exposures to different climate change scenarios on the back of investment consultant climate risk modelling.

IIGCC believes that mandatory full stress-testing of asset owner’s climate risk exposure would be premature at this time. However, basic stress-testing should be encouraged to the extent currently possible.”

IIGCC’s position on climate risk disclosure is based on the TCFD recommendations and detailed in the report Improving the pricing of risk: Aligning the EU financial system and climate change:

“IIGCC supports the development of disclosure principles for all parts of the investment chain, from companies to investors themselves. Given the nascent status of investor disclosure methodologies, investor disclosure principles should be non-prescriptive and allow for the emergence of best practice. So-called ‘2 degrees’ stress testing’ has to become a core part of corporate climate risk disclosure in all of the sectors most affected by climate change. Narrative reporting should complement quantified stress-testing. The results should be fed into corporate strategy through a systematic approach to risk management and disclosure.”

IIGCC also highlights in this report the need for greater transparency:

“The greater risks inherent in high-carbon assets need to become more transparent. Climate risk needs to be better integrated into the ratings provided by rating agencies and thus also into the risk charges that financial institutions covered by Solvency II and Basel III have to set aside. We welcome recent developments in this regard and urge greater uptake of climate risk assessments in mainstream risk assessments.”

The IIGCC report Financial Institutions taking action on Climate Change highlights different forms of stakeholder engagement as a means of pushing companies to take low carbon measures.

“An important contribution that the finance industry can make to address climate change is to engage with the companies in which they invest. Companies are integral to the activities of finance institutions, both as a customer for their services, as well as issuers of debt and equity securities that are core components of a global investor’s investment portfolio. […] The following examples highlight how finance institutions are using their ownership rights to put climate change firmly on the agenda with companies. This is taking place in three ways: direct engagement with companies; collaborative engagement with companies; and through exercising their active ownership rights as shareholders. Indeed, one of the new developments that has emerged recently is an increase in the number of shareholder proposals being filed that relate to climate change, as the examples below highlight.”