Willis Towers Watson (WTW) is targeting net-zero greenhouse gas emissions by 2050 at the latest, with at least a 50 per cent reduction by 2030, in its fully discretionary delegated investment portfolios.

The advisory, broking and solutions company said it believed climate change would materially affect the global economy and capital markets in both the short term and long term, adding that it was therefore important to consider and manage the financial impact of climate change on its clients’ investment portfolios.

WTW also stated that the transition to net zero should be achieved through a combination of decarbonisation of existing investments and new investment in long-term climate solutions, engagement and making changes to things such as index design, stewardship and risk management.

WTW global chief investment officer, Craig Baker, said: “Being strategically ahead of a net-zero transition will, in our opinion, significantly improve risk-adjusted returns for our clients. This will come from two sources – ‘better beta’ due to more effective stewardship and ‘alpha’ as the mispricing of climate issues is resolved.

“We think that understanding this transition will be one of the biggest sources of alpha across all asset classes and that this alpha opportunity is likely to be greatest in the next few years. We will therefore target pathways to net zero that seek out pricing opportunities while delivering a reduction in emissions of more than 50 per cent between 2015 and 2030, consistent with the goals of the Paris Agreement.”

He added that measuring the progress of the investment industry would be an important issue and acknowledged that there was “no single definitive metric that can be used to adequately measure progress and the data and analytics in the climate space are rapidly evolving”.

Baker continued: “We are therefore investing heavily in leading analytics in this space, including our proprietary Carbon Journey Plan methodology, the ‘impact measurement framework’ that we have developed together with other industry participants via the Thinking Ahead Institute, our acquisition of Acclimatise in December 2020, and the arrival of the energy finance team from the Climate Policy Initiative in January 2021.

“We will also continue to work with our advisory clients to set out and deliver on their own climate-related goals via Carbon Journey Plans, including analytics on how climate change might impact liabilities as well as assets.”

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