This paper explores the need for systematic stewardship by investors to address systemic climate risks. As institutional investors shift towards net-zero commitments, a transition of investment portfolios alone does little to support real-world decarbonisation, thus, direct engagement with corporations is necessary.

The paper presents five limitations of corporate engagement alone to achieve decarbonisation of the real economy necessary to mitigate the existential risk of climate change. These include the significant resources needed, a narrow, single company focus, the inefficiencies of voluntary, company-by-company disclosure, an uneven investor focus across companies and asset classes, and the boundaries set by the rules of the game.

The report recommends investors address these limitations by expanding their engagement approach through increased efforts in sector/value chain engagement, policy engagement, and asset manager engagement. It showcases the added value of each approach to support solutions across industries, stimulate the introduction of policy that addresses material climate information, and ensuring alignment with climate-related proxy voting, respectively.

Finally, the report emphasises the need to evaluate asset managers based on their systematic stewardship efforts towards climate and integrate it into ongoing monitoring processes. The report also recommends investors to advocate for smart climate policy as a fiduciary consideration, to communicate the long-term impacts of climate change on financial risk to portfolios, and integrate environmental, social, and governance issues in their strategic plans to support a regenerative economy while balancing alpha and societal welfare.

In conclusion, the paper provides a comprehensive overview of the climate engagement landscape, highlighting the importance of concerted efforts towards achieving systematic stewardship to mitigate systemic climate risks, highlighting the increasing urgency of addressing ESG issues.