We believe that engagement and proxy voting can be used as important means to influence corporate behavior and accelerate action in those sectors where it is most needed. We equally believe that through dialogue we are able to transfer best practices within sectors.
Our philosophy is to fully understand the business model of the companies we invest in, build relationships with management, provide feedback on current climate performance and set recommended actions to develop companies’ resilience in a low carbon economy.
In March 2018, we launched a three-year thematic engagement program on climate change. The original list of companies in focus were 49 oil and gas and utilities companies lagging on climate change performance as determined by our proprietary Climate Aware methodology. This methodology tilts towards companies that are better placed for the climate change transition, and tilts away from the companies which are lagging behind.
We chose to focus on these two sectors initially as they impact mostly on climate change but can equally provide capital and technologies to solve it.
One investor/company joint statement
on climate action in collaboration with co-leads within CA100+
1 letter to the EU
on the post-COVID-19 green recovery co-signed by other investors
More than 200 meetings
with management and representatives of the board of companies in the focus list through both individual and collaborative engagements
7 votes against
the chair of the company or a relevant board member in 2020 and 2021
We supported 26 shareholder resolutions
on climate change in relation to the focus list of companies
7 AGM statements
on progress made and areas for improvements in collaboration with co-leads within CA100+
Support for 2 global investor statements
to governments on climate co-signed by other investors
1 public letter to the South Korean
Ministry of Economy and Finance (a major shareholder in a focus company) and one media article in the country in collaboration with other investors to express our concerns
Our engagement objectives have been built around the Task Force on Climate-related Financial Disclosure (TCFD) framework on governance, strategy, risk management, metrics and targets. Ultimately, we want to make sure that:
- boards are equipped to oversee management in setting and executing a climate change strategy;
- remuneration is linked to climate change targets;
- climate risks are fully integrated in risk management processes;
- business strategies are reflective of robust scenario analysis;
- emissions reduction targets are set for the short, mid and long term and cover all the most material sources of emissions;
- performance against targets is measured and reported; and,
- advocacy activities with policy makers is conducted in consistency with the achievement of the Paris Agreement.
While the effort has started in connection with a specific passive strategy, the engagement project has covered our financial exposure to these companies across passive and active strategies in both listed equity and fixed income.
Today, we see more and more companies setting GHG emissions reduction targets including indirect emissions too.
We strongly believe that collaborating with other investors can increase our ability to influence and help companies focusing on consistent demands from the investment community.
This investor-led initiative is engaging with more than 150 of the world’s largest corporate greenhouse gas emitters. It was launched in December 2017 and now has the support of 575 investors, representing over USD 54 trillion of assets under management. It aims to curb emissions, strengthen climate-related financial disclosures, and improve governance on climate change risks. Over the last three years, we have been part of 29 coalitions in total, 8 of which we led (representing 60% of our engagement target list).
We have been an active member of Climate Action 100+ (CA100+), the largest collaborative effort from institutional investors to fight against climate change.
Overall, we witnessed a rapid evolution in our dialogues with companies on climate change. When we started our engagement program, companies did not want to take responsibility for scope 3 emissions coming from the use of their sold products. Today, we see more and more companies setting GHG emissions reduction targets including indirect emissions too.
The world has also moved from stress testing and business analysis focused on a 2°C world to more ambitious, well-below 2°C or 1.5°C scenarios, which are more aligned with the ambitions of the Paris Agreement.
Equally, there is more emphasis on renewable energy and low carbon technologies than in past with an increasing interest in the hydrogen economy.
Finally, we believe there is increasing scrutiny on the advocacy work of companies to make sure that management is not opposing climate regulation through indirect or direct lobbying activities.
Over the course of the last three years, we have also seen an increasing emphasis on phasing out coal and considering the social implications of this transition (the so-called “just transition”).