CFA Institute monitors key debates and evolving developments across the investment spectrum, including in sustainable investing. One critical topic is how environmental, social, and governance (ESG) information is used in investment decisions and how to incorporate considerations for achieving net-zero emissions while still fulfilling fiduciary duties to clients.

In January 2021, CFA Institute shared its thoughts on ESG integration, highlighting that considering ESG factors can help investment professionals make better choices that benefit their clients.

Now, in June 2024, we're addressing net-zero investing. Net zero means balancing the amount of greenhouse gases emitted with the amount removed from the atmosphere. For our purposes, we define net-zero investing as pursuing strategic investment goals while also contributing to the global goal of achieving net-zero emissions.

We understand that achieving net zero is complicated and involves many parts of the economy. While finance is just one piece of the puzzle, it is crucial to the collective efforts of governments, businesses, and the public to tackle climate change. Climate issues affect societies and markets differently, and transitioning to net zero will be challenging and expensive. A global perspective and a systemic approach are needed.

Significant hurdles need to be cleared to reach net-zero goals, making it hard for the investment industry to find solutions. Recognizing these challenges, we have set out our high-level perspectives on climate-related disclosures by public companies, the use of climate-related information in investment decisions, and efforts to mitigate and adapt to climate change:

• Climate-Related Disclosures by Public Companies: We advocate for relevant, reliable, comparable, timely, and understandable climate-related disclosures that are useful for investors. Standardizing disclosures and improving quality is crucial, along with assurance by independent professionals.
• The Use of Climate-Related Information in the Investment Process: Investors should consider material climate-related information in their decisions without mandates or prohibitions from legislators and regulators.
• Climate Change and Efforts to Mitigate and Adapt: Climate change presents risks for investors, and the financial sector can contribute to achieving net-zero emissions through collaboration and proactive use of capital. We support organizations and professionals focusing on net zero by providing education, resources, and advocacy.

In summary, we stress transparent, reliable disclosures, the consideration of material climate-related information in investment decisions, and collaborative efforts to address climate change, with a focus on achieving net-zero emissions.

CFA Institute Research and Policy Center offers research, thought leadership, tools, and actionable insights to put these views into practice.