We launched a three-year engagement program on climate change in 2018. The objective of our dialogue with 49 oil and gas and utilities companies is to support the transition to a low carbon economy.
From the start of the program through to the end of 2019, we've organized 128 meetings with the companies in the focus list. 29 of the 49 target companies have been engaged collaboratively through Climate Action 100+ (CA100+). We're also leading an increased number of CA 100+ coalitions: seven in 2019, compared to five in 2018.
In-depth analysis on the companies in the focus list has been completed to assess:
- Alignment with the Taskforce on Climate-related Financial Disclosure (TCFD) recommendations
- Evidence of the Board's oversight of climate related risks and opportunities and integration in remuneration packages and board selection processes
- Evidence of integration of climate change in risk management
- Existence of scenario analysis and reflections on impact on the business model
- Disclosure on strategy and initiatives for reducing GHG emissions
- Disclosure of goals and progress to reduce normalized GHG emissions
- Ensure consistency of indirect and direct lobbying activities on climate change with the Paris Agreement
Based on this original assessment we've identified tailored engagement objectives for each company in the list. After more than 18 months of dialogue with the companies, we have been able to assess progress against these objectives for 26 companies.
For the remaining 23, we decided to coordinate at least another additional meeting with management before being able to assess the current level of responsiveness.
The table below summarizes our measure of progress in the engagement focus list so far:
A summary of our measure of progress in the engagement focus list so far with 15% good with 50-75% of objectives met, 19% excellent with 75-100% of objectives met, 27% have been limited with 0-25% of objectives met and 39% where only some objective met (25-50%).
Sector: Oil & gas
Topics addressed: Strategy
UBS AM has been engaging with the company within Climate Action 100+, alongside two other investment managers. The engagement has been focused on the company's strategy to transition to a low carbon economy.
During the course of the dialogue, the company took significant steps to meet shareholders' requests on climate change. These included the development of an intensity reduction target, including scope 1,2 and 3 emissions, and the increase of climate change targets linked to executive pay. Management is expanding low carbon energy activities and intends to increase its market share in gas and electricity distribution in its local market.
At the end of 2019, the company committed to undertake a global review of lobbying activities by Q3 2020 and pursue positive lobbying dialogue on climate change. The company has also committed to net zero emissions by 2050 in alignment with the Paris Agreement, becoming the first oil & gas company to do so. Future dialogue will focus on actions which can deliver on these positive ambitions and enhanced information on scenario analysis.
Region: North America
Topics addressed: Strategy
In 2019, we met with the CEO and CFO of the company as a follow up to an earlier meeting in 2018. We were impressed by the progress from the company over the last 12 months, including scenario analysis and targets aligned with below 2°C global warming, a first climate assessment report aligned with the TCFD expectations and increased uptake from consumers of energy efficiency programs.
In December 2019, the company announced a plan to reduce carbon emissions by over 90% by 2040 compared to 2005 levels. In addition, they've announced a target of net zero methane emissions for the company's gas delivery system by 2030. Financial performance has also been positive. Future conversations will focus on the inclusion of climate targets in executive compensation and the potential commitment for net zero total emissions by 2050.
Topics addressed: Strategy
During 2019, we met with the company’s chair of the Supervisory Board and the head of sustainability on several occasions to discuss the implications of recent regulatory developments on retiring coal plants and the company's overall climate change strategy. Topics under discussion included:
- Imminent acquisitions in the space of renewable energy
- Science based targets
- Executive remuneration linked to climate change targets
- Oversight of lobbying activities on climate change
At the end of 2019, the company set the target of net zero GHG emissions by 2040, raising standards for peers in the sector. The company has also committed to future disclosure in alignment with the TCFD recommendations and the introduction of climate targets in LTIP plans from 2021.
Finally, the results of a global review of lobbying activities on climate change will be shared with the market before the next AGM in 2020. Future dialogue will focus on the definition of a coal phase-out plan in alignment with the Paris Agreement. As a result of this engagement dialogue, we've increased exposure to this company through some of our active equity strategies.
Views and opinions expressed are presented for informational purposes only and are a reflection of UBS Asset Management’s best judgment at the time a report or other content was compiled. UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions contained in the content of this webpage have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith but no responsibility is accepted for any errors or omissions. All such information and opinions are subject to change without notice but any obligation to update or alter forward-looking statement as a result of new information, future events, or otherwise is disclaimed. Source for all data/charts, if not stated otherwise: UBS Asset Management.
Any market or investment views expressed are not intended to be investment research. Materials have not been prepared to address requirements designed to promote the independence of investment research and are not subject to any prohibition on dealing ahead of the dissemination of investment research. The information contained in this webpage does not constitute a distribution, nor should it be considered a recommendation to purchase or sell any particular security or fund. The materials and content provided will not constitute investment advice and should not be relied upon as the basis for investment decisions. As individual situations may differ, clients should seek independent professional tax, legal, accounting or other specialist advisors as to the legal and tax implication of investing. Plan fiduciaries should determine whether an investment program is prudent in light of a plan's own circumstances and overall portfolio. A number of the comments in the content of this webpage are considered forward-looking statements. Actual future results, however, may vary materially. Past performance is no guarantee of future results. Potential for profit is accompanied by possibility of loss.
© UBS 2020 The key symbol and UBS are among the registered and unregistered trademarks of UBS.