Summary disclosure against TCFD recommendations continued
Climate scenario analysis Morningstar Sustainalytics uses climate scenarios provided by the Inevitable Policy Response (“IPR”) and International Energy Agency (“IEA”), which the data provider groups into four broad classifications: Orderly, Disorderly, Hot House World and Too Little, Too Late. Scenarios are projections of what could happen in the future, based on plausible and consistent descriptions of possible climate futures. Low-carbon transition value at risk Morningstar Sustainalytics currently models the potential impact of three Paris-aligned scenarios through to 2050. These three scenarios are: IPR – Required Policy Scenario (“RPS”): An orderly path to net zero, which limits global warming to 1.5°C with strong ambition and moderate-to-fast transition across all sectors, with regional variation. IEA – Net Zero Emissions (“NZE”) scenario: A normative scenario that shows a pathway for the global energy sector to achieve net zero CO 2 emissions by 2050, with advanced economies reaching net zero emissions in advance of others. It is consistent with limiting the global temperature rise to 1.5°C (with at least a 50% probability).
Portfolio exposure to transition risk by scenario and risk type
IPR – Forecast Policy Scenario (“FPS”): A disorderly path to net zero, which limits global warming to 1.8°C. Unlike the IPR RPS, the FPS’s key assumption is that governments will introduce and enforce more stringent climate policies later than in the orderly scenario (mid-2020s), driven by the Paris Agreementʼs ratchet mechanism. The FPS considers the economic impacts of these policies, including disruptions in high-carbon sectors and opportunities in low-carbon industries. As at 30 June 2025, FUM under our discretion totalled £16.2 billion 1 , representing the Group’s discretionary portfolio. Morningstar Sustainalytics’ analysis currently only covers public equities and corporate bonds, and is dependent on the quality and availability of underlying data. As a result, the overall LCT-VaR output covers 54% of the Group’s discretionary portfolio (£8.7 billion). We expect to progressively expand reporting and for coverage of the portfolio to broaden, as the relevant data and methodologies become available across asset classes and as a result of better corporate disclosures.
Overall Policy Market
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IEA Net Zero
IPR RPS
IPR FPS
The analysis shows that, for every £100 (GBP) invested, the value of the portfolio could reduce by £6.63 (6.63%) in an IEA NZE scenario (orderly), £4.43 (4.43%) in an IPR RPS (orderly), and £5.67 (5.67%) in an IPR FPS (disorderly). In aggregate, our portfolio appears most exposed under the IEA NZE scenario, which represents the most stringent and immediate orderly transition pathway. This heightened exposure is likely driven by the uniform and simultaneous application of ambitious climate policies across all regions and sectors. In contrast, the IPR RPS, whilst also aligned with a 1.5°C pathway and classified as an orderly transition, results in the lowest portfolio risk. This could be largely due to its broader and more diversified approach to mitigation, which includes land-use change and nature-based
solutions. When comparing the IPR orderly and disorderly scenarios (the IPR RPS and IPR FPS, respectively), we see that portfolios are more exposed under the disorderly scenario. In a disorderly world, delayed climate action leads to higher carbon prices and more stranded assets. Companies have less time to adapt, resulting in rising direct and indirect costs. Overall, the analysis suggests that an orderly scenario is comparatively preferable for our investments and supports our understanding that portfolio companies need to be managing their transition risks by developing credible decarbonisation strategies, aligning with emerging regulatory frameworks, and investing in adaptive capabilities that mitigate both direct and indirect costs associated with the low-carbon transition.
1 Note that this differs from the Group’s year-end reported FUM (£16.6 billion) due to the exclusion of execution-only accounts.
50 Brooks Macdonald Group plc Annual Report and Accounts 2025 Brooks Macdonald Group plc 50
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