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PORTFOLIO COMMITMENT Designed to have a net portfolio carbon footprint which declines by 50% by 2030 on the way to zero by 2050, with regular client reporting on indicators and progress
Integrating climate considerations into an investment solution is not simply about investing in companies with the lowest emissions today, it is also about robust quantification of companies’ future climate risks. There is no one-size-fits-all for quantifying risks. A top-down approach can be a useful guide, but difficult to discern what good and bad looks like at the company level given sector nuances. Company emissions data is backward-looking and is no guide to the future path to decarbonization. Systematic data approaches fail to capture real-time progress and commitments; this highlights the necessity of untangling these assumptions to get a clear picture of how companies are actually seeking to align to net zero. To solve for this, we are developing a framework to help us assess net-zero transition plans from the top down and bottom up, taking into account company- and sector-level nuances. While integrating traditional measures, we go beyond them, allowing our existing investment strategies to assess the opportunities fully. Our climate transition indicators bring together our Global Equity and Fixed Income research teams to jointly determine appropriate sector-level alignment indicators. This serves to inform portfolio construction for our net-zero committed strategies. Net-zero investment requires a multi-tool approach that includes setting ambitious and transparent goals, agreeing on minimum standards, measuring risk and opportunity, and engaging with at-risk companies to encourage mitigation strategies. In addition, every net-zero journey will be different, and changes in regulation and legislation will require dynamic, adaptable investment solutions that can be calibrated to clients’ specific and evolving needs.
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MINIMUM STANDARDS Excludes companies lacking alignment with the transition to a low carbon economy, while tilting toward those contributing to climate solutions
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COMPANY ANALYSIS
Internal research assesses all holdings for net-zero alignment, informed by proprietary ESG quotient rating and climate value-at-risk scenario analysis
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ENGAGEMENT Company- and sector-specific engagement on climate change, with focus on materiality, tracking objectives and achieving real-world outcomes
2021 ESG ANNUAL REPORT
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