Introduction

Climate change poses both physical and financial risks, particularly for asset owners responsible for retirement security and insurance provision. Members of the UN-convened Net-Zero Asset Owner Alliance have committed to aligning investment portfolios with net-zero greenhouse gas (GHG) emissions by 2050. This goal is consistent with limiting global temperature increases to 1.5°C above pre-industrial levels.

Achieving this objective requires a comprehensive approach to sustainability, including proactive engagement in public policy debates. Strong policy frameworks support the transition to a low-carbon economy and provide investors with certainty in capital allocation. Policy engagement is necessary to fulfil fiduciary duties while managing climate-related financial risks and achieving target returns.

Principles

The Alliance has outlined four key principles for asset owners engaging in policy advocacy: accountability, activity, consistency, and transparency.

Accountability: Asset owners should establish their own policy engagement approach based on the interests of beneficiaries, customers, shareholders, and the wider community. There is no universal model for effective climate advocacy, as approaches will vary across different jurisdictions.

Active engagement: Asset owners should take an active role in supporting policymakers to address climate transition challenges. Providing expertise and contributing to climate-positive policies are essential. Waiting passively is not an option, as investors have a responsibility to help shape effective regulatory frameworks.

Consistency: Engagement with policymakers, industry associations, and coalitions should align with asset owners’ net-zero commitments. Advocacy efforts must support climate action rather than undermine it.

Transparency: Asset owners should be able to demonstrate how their climate policy engagement aligns with net-zero goals. External communications should be clear, ensuring stakeholders understand the rationale behind policy positions.

What could this look like in practice?

To operationalise these principles, asset owners should integrate climate policy engagement into their overall sustainability strategies.

Accountability: Managing long-term climate risks requires clear explanations of how policy engagement activities align with fiduciary responsibilities. Asset owners should communicate how their advocacy efforts serve the interests of stakeholders, ensuring that their actions support the financial well-being of beneficiaries.

Active Engagement: Asset owners must engage policymakers regularly to address systemic risks related to climate change. Both physical and transition risks pose challenges that require coordinated responses.

Engagement should also extend beyond direct policymaker interactions to include collaboration with portfolio companies and asset managers. A holistic strategy ensures alignment across investment and advocacy activities. Asset owners should contribute to the development of standards, policies, and regulations that facilitate a net-zero transition. This aligns with the Paris Agreement’s goal of making financial flows consistent with low-carbon and climate-resilient development.

Consistency: A clear governance framework should guide policy engagement to ensure alignment with net-zero targets. Membership in industry organisations should reflect asset owners’ climate commitments. Inconsistent messaging or contradictory affiliations may undermine credibility and policy influence.

Transparency: Climate policy engagement often involves qualitative and confidential discussions, making public reporting challenging. However, transparency remains essential. Asset owners should be prepared to explain how their advocacy aligns with climate objectives. Clear disclosure enhances accountability and reinforces commitments to net-zero goals.

Conclusion

The principles and practices outlined in these guidelines provide asset owners with a structured approach to integrating climate considerations into policy engagement. Aligning advocacy efforts with long-term financial interests supports the transition to a low-carbon economy.

The Alliance encourages members to contribute to policy decisions that facilitate real-world emissions reductions. By advocating for effective climate policies, asset owners can help create an enabling environment that supports sustainable investments and mitigates climate-related financial risks.