Avoiding the harmful impacts of climate change

Climate change is among the most pressing challenges facing humanity and has significant implications for all three elements of ESG (environmental, social and governance) not just the “E”. Being a member of the Net Zero Asset Managers initiative, we are committed to aligning our investment approaches with its objectives. We do this by analysing the physical threats of climate change, identifying which sectors are impacted most, and engaging with companies to set transition pathways.

Many of our engagement discussions focus on climate risk assessments, exploring how the companies we invest in are reflecting climate risk and the low-carbon transition in their strategy, operations, and product pipelines. During 2021, we engaged 88 companies in direct conversations on environmental risks and impacts, including climate change. Environmental issues continued to gain relative importance in our engagement activities, increasing their share by another three percentage points to 22% of all engagements in the past year. This reflects the high priority that our clients place on decarbonising the economy, as well as the higher scrutiny of sustainable use of resources by our portfolio companies.

Our thematic, focused approach targets engagement with companies in sectors where the potential impact can be most significant, for example oil, mining and petrochemicals. Our climate engagement with companies allows us to fully scope companies’ climate profiles, including the full breadth of environmental factors but also related social and governance indicators. The feedback we collect, along with our discussions in related engagement meetings, provides us with in-depth insights into where companies stand when it comes to implementing climate strategies, the specific details of their pathways, how embedded climate is in strategy planning, alignment of management interests, dedicated capex to sustainable products and solutions, and just transition. This allows us to assess the ambition and credibility of the pathway and how best to engage in future to ensure its execution.

Read more about our approach to climate action and climate transition in our Sustainability and Stewardship Report

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