The UK Investment Consultants Sustainability Working Group (ICSWG) has launched a framework aimed at supporting investors looking to evolve their climate strategies from portfolio decarbonisation towards real-world outcomes.

It noted that current approaches to sustainable investing often focused on decarbonisation, including approaches such as investing in low-carbon assets.

While this approach typically decarbonises a portfolio, the ICSWG warned it would not necessarily protect against wider financially material systemic risks.

To protect portfolios from these risks, the group called for an investment approach that focused on achieving real-world outcomes.

The ICSWG said this was being increasingly recognised by investors as their understanding of climate change and how it is developing improves.

Investors’ strategies for taking account of climate change will likely become more complex in the future, with the new framework aiming to help investors in their decision-making and assist them in supporting real-world change that is aligned with their financial objectives.

“This framework is designed to support and guide investors along a spectrum of decision making from portfolio decarbonisation to real world outcomes,” commented Hymans Robertson head of defined contribution investment and workstream member, Alison Leslie.

“It also challenges investors to answer some key questions along the way to help them make the right decisions for their beneficiaries.”

Mercer head of sustainability UK and workstream member, Keith Guthrie, added: “This framework will help our clients move beyond decarbonisation by driving real-world outcomes through engagement and investment.

“It also respects their diverse views and supports their sustainable goals.”

LCP head of responsible investment and workstream chair, Claire Jones, noted that many asset owners were now recognising that it is not enough to reduce the carbon footprint of their portfolio if they want to manage the risks to their long-term investment objectives from climate change.

“This framework helps them put more emphasis on reducing physical climate risk, both through managing physical risks to assets in their portfolio and by contributing to the economy-wide transition that is needed to avoid large-scale destruction of value in higher warming scenarios,” she concluded.

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