Net-Zero Investing

Increasingly, investors are recognizing that changes in the Earth’s climate have the potential to disrupt economic activities, which in turn can affect the risk and return of their investments. Governments also recognize the economic risks of climate change as well as the social, health, and national security risks. Scientific evidence shows a clear link between greenhouse gas emissions and climate change. As a result, nearly every nation has agreed to make efforts to reach global peaking of greenhouse gas emissions as soon as possible. This globally shared goal is often referred to as “net zero.”

Many investors — especially those with long-term horizons — expect attainment of net zero to help in achieving their investment objectives, reasoning that their long-term investment returns depend on the stability of natural ecosystems, societies, economies, and financial systems. Some of these investors have been collaborating through working groups, coalitions, and alliances to explore how they might support and contribute to net zero within their investment decisions and activities. “Net-zero investing,” as this approach is sometimes called, is in its infancy; knowledge and practice in this area are still evolving.

CFA Institute aims to educate and support investors who are interested in net-zero investing, recognizing that not all investors want to follow this approach. The work on net zero published by CFA Institute is guided by principles and positions that reflect its mission, vision, and values. CFA Institute products and publications address net zero both narrowly and broadly, reflecting the fact that net zero is a sub-topic of climate — which is a sub-topic of the environment, which is a sub-topic of ESG investing, responsible investing, and sustainable investing.