RPIA SUSTAINABILITY REPORT 2021
OVERVIEW FIRM
RPIA SUSTAINABILITY REPORT 2021
OVERVIEW FIRM
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INVESTMENT MANAGEMENT
INVESTMENT MANAGEMENT
Incorporating Thematic Focus Into Our ESG Research
Targeted ESG Portfolios
In 2021, RPIA identified key themes that we believe will have a meaningful impact on risk and returns across many sectors and geographies in the coming years. Although they are captured in our overall ESG framework, these themes warrant additional, more-focused analysis. The team creates specific modules within the RP Barometer to analyze these themes and they are often included as key discussion points when meeting with issuers.
As we refine our ESG integration process, we are also beginning to discuss possible opportunities to develop solutions for investors in the form of ESG-focused portfolios. RPIA has managed a carbon-reduced corporate bond portfolio for over two years, successfully delivering on our dual mandate of attractive risk-adjusted returns combined with a lower carbon profile than the index. Leveraging our experience with this mandate, we hope to explore new solutions with our investors in 2022 that focus on targeted ESG themes. Throughout 2021, we have had meaningful conversations with investors about the ESG factors relevant to their organizations and where we believe a solution is possible when prioritizing the following three concepts.
The Carbon Transition
Workplace Equality
Although workplace inequalities faced by women, minority groups, people with disabilities, and other groups within society were a focus before COVID-19, the pandemic has only intensified the scrutiny on and importance of these social aspects. Research has shown that more diverse companies tend to exhibit better risk management and profitability, which is especially important to our industry. 3 Our ESG framework includes a proprietary Workplace Equality scoring module that provides information about an issuer relative to its peers based on five key pillars (see Increasing Focus on Social Pillar below). Our investment team’s work has also helped inform our firmwide discussion on these matters, leading to improvements and initiatives at the corporate level as we strive to incorporate the standards we expect from companies in our portfolios into our own culture.
Global economies are quickly shifting away from fossil fuel consumption as they recognize the risks climate change poses to humanity and global economic stability. By the end of 2021, 136 countries and 684 companies had made net-zero pledges, representing 90% of global GDP. 2 However, we note that these commitments vary greatly by time and scope, often making them not directly comparable. Our ESG framework includes a Transition Risk module that creates an in-depth carbon profile for an issuer compared to their peers and the broader market. It also compares the ambition of carbon reduction targets versus the industry peer group and a 1.5°C pathway.
3 Key Factors for Building a Sustainability-Focused Portfolio 1 2 3 Measurable Focus on quantifiable factors that can be measured and monitored. Impactful Focus on issuers exposed to climate risks or those that could improve their
Ambitious Seek to invest in companies that are
ambitious with their ESG goals, and advocate with others to drive material change over time.
diversity metrics as a means of promoting change.
Possible Focus Areas for a Sustainability Portfolio
Environmental Decarbonization of the Economy
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S G
Social Equal Treatment & Opportunity in the Workplace
Governance Quality of Board Level Leadership & Composition
2 Net Zero Tracker 3 McKinsey & Company - Women in the Workplace 2021
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