Reclaiming nuance — how evidence, integrity, and realism shape our approach to climate investing

When we began shaping our Climate Change Position Paper, it didn’t feel like drafting a policy document. It felt like stepping back, taking a breath, and being honest about the journey we have been on as an industry for the past few years. Climate change is not a fixed challenge; it shifts as science evolves, markets adapt, and political winds change. To do this responsibly, we felt it was prudent to go back to first principles routed in evidence: real data, academic research, and honest analysis.

What emerged was not just an updated position, but a clearer philosophy - one shaped by nuance, realism, and a deep sense of stewardship for our members.

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What the Paris Agreement really says

Revisiting the Paris Agreement was one of the most grounding parts of this process. Its core ambition (limiting warming to “well below 2°C,” ideally 1.5°C) is familiar, but the underlying nuance often gets lost.

First, Paris is built on shared responsibility. Investors are only one actor in a global system where governments set policy, regulators set standards, companies drive operational change, and civil society shapes expectations. Truly connecting with this allows us to stay both ambitious and realistic.

Second, transition pathways vary. Countries, sectors, and regions progress differently: emerging markets face developmental constraints, high emitting industries face technical ones. The Agreement acknowledges these differences and embracing them made our approach more grounded.

Third, uncertainty is baked in. Achieving global net zero by 2050 provides only a probability, not a guarantee, of limiting warming to 1.5°C. These pathways rely on assumptions and estimates. This underscored the need for flexibility rather than a rigid interpretation of a single pathway.

Together, these insights shaped both our new position and our mindset. They reminded us that humility is essential in a field that often rewards overconfidence.

Learning from the industry’s early journey

We also took time to reflect on the industry’s response over the past decade and our own place within that journey. In the years after Paris, and especially after the 2018 IPCC report, there was a powerful wave of energy and conviction. Net zero alliances formed rapidly. Institutions made bold commitments. In many ways, this was inspiring.

But there was also a shared learning curve. Many investors set top-down targets before fully understanding what they meant for every portfolio, every asset class, every market. As an industry, we learnt as we went along.

Looking back, it’s clear that the intent was sincere, even if the pathways were still emerging and objectives sometimes fuzzy. Recognising that helped us let go of unhelpful comparisons and instead focus on what the industry has learned together: that credible climate action must be evidence led, strategically grounded, and aligned with fiduciary duty.

Letting evidence guide us in a changing world

One of the sobering moments in our review came when we faced the evidence directly: the world is not currently on track to limit warming to 1.5°C. Policies have stalled in several major economies. Global emissions continue to climb. Market mispricing is still prevalent and rife with inconsistencies.

These were difficult truths to sit with, but they strengthened our resolve to base our strategy on reality, not aspiration alone. We conducted a deep review of the academic and empirical literature, looking at both supportive and contrarian views, to ensure our repositioning was transparent, rigorous, and fair.

Finally, we needed to get clear on what we were trying to achieve and acknowledge trade-offs, which we acknowledge in both our RI Policy and this position paper. Climate dependency and impact have previously been unhelpfully conflated; they are not the same thing. We are very clear in our position paper that both are relevant to us, but they are addressed in different ways. Actions that could help mitigate the economic impacts of climate change might increase risk elsewhere in our portfolio. These realities needed to be grappled with along with a dose of realism around the effectiveness of any actions we take.

This body of work didn’t push us away from climate ambition. It helped us refine it, anchoring it more firmly in realism and long-term stewardship.

Reframing ambition: the next chapter of our climate strategy

From this journey, one major shift emerged, alongside two areas which represented our long-held convictions but we felt required further explanation in a public forum.

1. A shift from a rigid target to a Paris‑aligned ambition

We still aspire to align with the goals of the Paris Agreement. But we no longer believe that a single, fixed temperature constraint for the whole portfolio reflects the complexity of the real world. Ambition gives direction without implying false certainty. It allows us to be honest, without being defeatist.

2. Emphasising a bottom‑up, case‑by‑case approach

Investment objectives, underpinned by valuation discipline and risk control, remain paramount. Assessing climate risks and opportunities within portfolio construction must be done within the realities of sectoral and regional pathways and weak policy signalling. A single pathway simply does not exist, and pretending it does helps neither markets nor most importantly our members. Our stance respects this.

3. Systems stewardship remains at the core of our strategy

As a large, diversified investor, our fate is tied to the health of the whole economy. Policy failures, inconsistent standards, and system level risks affect long term returns in ways company level engagement cannot fully address. Expanding upon our commitment to systems stewardship with robust evidence felt not only logical but deeply important. Our award-winning work in systems stewardship will therefore remain central to our climate strategy.

A call for more nuance, together

Perhaps the most personal realisation from this entire process is how much the climate conversation benefits from greater nuance. The world is complex. The transition is messy. Science evolves. Policies stall. Markets surprise us. And as an industry, we need to treat ourselves as a “learning organisation” in the Peter Senge^[1] sense: one that continually strengthens its capacity to understand complexity, challenge assumptions, build shared vision, and learn collectively through systems thinking and collaboration.

Simplified narratives once helped move the conversation forward. But now, being open about uncertainty and complexity may be one of the most constructive contributions we can make.

Our Position Paper is our attempt to do exactly that. This repositioning feels more honest, both with ourselves and with our stakeholders. It respects what the Paris Agreement asks of investors. It reflects the world as it is through portfolio construction; while pushing for the world we wish it to be through our stewardship programme. And it helps us continue to act with integrity, transparency, and ambition.

To everyone navigating this journey alongside us, we hope you will continue to engage with evidence, and mostly importantly acknowledge nuance. Complex issues require complex assessments, that are not binary or “black and white”.

Ultimately, let’s all play our part in the wider ecosystem to helping shape a transition that is not only ambitious, but honest and enduring for our members. 

[1] The Fifth Discipline (1990).

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