Change in the air: Climate investing in 2026 and beyond

Over the past decade, climate investing has evolved from a niche concept into a central pillar of global investment strategies. Since the Paris Agreement, institutional investors have increasingly integrated climate risk and opportunity into their investment decision-making. 

Our own net-zero strategies, and others with climate-related objectives, aim to drive progress in this space, aligning responsible investing with our stewardship voice to drive real-world change. 

With the world approaching an environmental inflection point, the urgency of meeting climate targets – and objectives tied to the protection of nature more broadly – cannot be overstated. Despite progress, global emissions trajectories remain misaligned with ambitions to limit the global average temperature rise to 1.5°C. The scale of investment required to meet climate goals is immense and politically complex, raising critical questions for investors seeking to balance risk and returns.  

One lesson is clear: change can occur rapidly. Investors must remain agile, balancing long-term objectives with near-term realities, managing systemic risks and utilising their industry voice effectively.  

Three need-to-know initiatives for 2026

We have sat at the table as the asset management and pension industries have come together to debate these risks and opportunities. This has resulted in the creation of investment frameworks and initiatives designed to support the next phase of climate-aligned investments.  

To cut through the noise and acronyms, here are the top three initiatives we have influenced that should be on investor radars in 2026:

NZAM: The Net Zero Asset Management initiative (NZAM) is a global voluntary alliance of asset managers committed to aligning their investments with achieving net zero greenhouse gas emissions. NZAM will publish its new commitment statement for members in Q1 2026. This has been shared with NZAM signatories, and we anticipate signatories will be reviewing their targets and updating their commitments over the next year. 

NZIF 2.0: The Institutional Investors Group on Climate Change issued its comprehensive guidance in 2021 to help investors develop net-zero strategies, and the updated Net Zero Investment Framework 2.0 (NZIF 2.0) was finalised in 2024, with detailed implementation guidance published in 2025. One key change is the introduction of a standardised framework for assessing the net zero alignment of underlying investments. We expect to see investors and others explore how this guidance can be used to meet net-zero objectives. 

GFANZ Index Investing workstream: The Glasgow Financial Alliance for Net Zero (GFANZ) was established to help financial institutions support client efforts to align with a clean energy transition. In 2023, GFANZ launched its index investing workstream, co-led by L&G. The workstream consulted on voluntary guidance on how index investing strategies could move beyond targeting decarbonising at the portfolio level and also encourage real economy decarbonisation in investee companies. Its work concluded last year, but its focus on how index investing can support real-economy decarbonisation remains influential.

Helping clients navigate change in climate investing

Staying on top of climate investing frameworks, regulations and data integration is a major challenge for investors. With this in mind, in the coming months we’ll publish a series of articles covering these topics, with an emphasis on practical client insights.

• Getting to grips with NZAM: Why we believe this initiative has the potential to drive meaningful change, and what the commitments mean at the portfolio level.
• The role of private markets in funding the energy transition: The vital role of private market investment in building out the infrastructure needed for the clean power transition.
• Climate scenarios: Our latest thinking on potential climate pathways, and the implications for investors.
• The L&G ESG Score: How this rich dataset is evolving to seek to meet the needs of climate investors.
• NZIF 2.0 in index strategies: Why this framework could prove instrumental for index investors pursuing climate targets.

Glossary of key climate terms: 

1.5°C: Limiting the increase in average global temperatures by 2100 to no more than 1.5°C above pre-industrial levels has become the consensus reference point in climate science in the years following the 2015 Paris Agreement. The Intergovernmental Panel on Climate Change (IPCC) sets out consensus that crossing the 1.5°C threshold increases the risks associated with climate change.

Adaptation: How investee entities adapt to a warming world and become more resilient to the consequences of missing global climate targets.  

Net zero: Net zero means achieving a balance of emissions and sinks. Achieving this is a means of limiting the rise in global temperatures to 1.5°C. Context is key, as the term can refer to only carbon dioxide, or all greenhouse gas emissions, including for example methane and nitrous oxide.

Physical risk: The physical changes occurring from a warming world, including extreme weather events.  

Real-world change: Decarbonisation in the real economy and undertaken by investee entities as compared with reduced exposure through portfolio or asset allocation decisions.

Sinks: These absorb more greenhouse gas emissions than they release into the atmosphere. Sinks can be naturally occurring, such as oceans and forests, or artificially created such as carbon capture storage (CCS) solutions.   

Transition: The transition of the global economy to use clean energy, alongside a decarbonisation of the economy to meet net-zero emission targets.