We believe that climate change poses a systemic risk to investment markets.
While excluding the most carbon-intensive companies from a portfolio may boost its resilience in a changing world, almost all assets will be compromised if action to mitigate climate change is not accelerated.
As guardians of our clients’ assets, it is crucial that we use our financial power and ownership rights to push companies forward on reducing the emissions associated with their operations and value chains. We have long supported work to limit the global temperature increase to below 1.5 °C and are committed to accelerating the transition to a decarbonised economy.
Our strategy has three components:
We are working with policymakers, both in the UK and overseas, towards more meaningful regulatory action. This includes the UK and Canadian governments’ Powering Past Coal Alliance and the Transition Plan Taskforce.
Investors can be highly influential in encouraging companies to take steps to reduce their own environmental impacts. Our engagement with companies on climate change goes back a long way and, from 2012, we were instrumental in bringing the investment industry together on this topic through a forerunner to Climate Action 100+ (Aiming for A). Today, our climate stewardship programme targets the most carbon-intensive businesses we invest in.
We avoid investing in companies that are highly exposed to changing legislation and regulation aimed at tackling climate change. Accordingly, we do not invest directly in companies that generate more than 10% of their revenue from the extraction, production and/or refining of oil and gas. We assess the remaining exposed industries against the goal of the Paris Climate Change Agreement.
Why we view climate change as the biggest threat to our planet
Our approach to traditional oil and gas
Our portfolios restrict direct investment in companies that generate more than 10% of their revenue from the extraction and/or refining of oil and gas. It is part of our approach to avoid investing in/profiting from companies that cause the most social and/or environmental harm. It is important to note that this is not an ethical decision. It is a codification of our long-standing position that, due to the likelihood of legislation and regulation impacting negatively upon the business models of these businesses, we are not going to allocate our clients’ capital to them.
Initiatives
Climate action
We are committed to accelerating the transition to a net-zero emissions economy and protecting the value of our clients’ investments during the transition.
Examples
Nestlé
Sustainable Development Goal 13: Climate Action
We are co-lead investor for Nestlé on behalf of the collaborative initiative, Climate Action 100+. In Q1, the company published its new sustainability report. There are three improvements that align clearly with the coalition’s asks. Nestlé now benchmarks its emissions trajectory against a 2018 baseline; discloses the relative contribution of each decarbonisation lever to its annual total emissions reductions; and has introduced a 2023 Performance Share Unit Plan with greenhouse gas emissions reductions as a fourth pillar.
NextEra
Sustainable Development Goal 13: Climate Action
Based in the US, NextEra is one of the world’s largest generators of renewable energy. Despite its leadership in the generation of clean energy, the company has historically lagged peers in climate-related disclosure. In the run up to the 2024 AGM, we led the filing of a climate-related shareholder proposal at NextEra. NextEra has a target to reach net zero carbon emissions by 2045 although some of the trade associations to which it belongs can present forceful obstacles to addressing climate change. Our proposal asked the Board to report to shareholders on its approach to identifying and addressing misalignments between NextEra's lobbying and policy influence activities, and its 'Real Zero' goal. The proposal received an encouraging 33% support at the AGM in May.