Your Target: Net Zero

Investors adopting a net zero strategy may seek to adjust their asset allocation based on the climate-related risk and return profile of their investment, which includes the selection of climate-related products. Investors can choose from a variety of climate-related metrics and data that can be integrated in the portfolio construction process and that are utilized in investment products. Some examples of such measures are more backward-looking in nature, while others are more forward-looking. The feasibility and applicability of different metrics in portfolio construction depend on various factors, including data quality and coverage, and are also asset class-dependent.

While we prefer to engage with companies, investors may choose to exclude certain investments based on their net zero investment goals. These custom exclusions can be made based on a variety of metrics, such as the volume of CO2 emissions of a company, or indirect ownership of companies involved with certain industries. Determining appropriate thresholds for some of these metrics can prove complicated. We can help our clients with the required data and assistance to develop these exclusionary screens.

Our Asset Stewardship Program is focused on maximizing the long-term value of our clients’ investments. We believe our portfolio companies must have effective oversight and governance of opportunities and risks that are material to their businesses and that they should disclose how they are overseeing such risks and opportunities to investors. Companies across markets and industries can be exposed to climate-related transition and physical risks as well as opportunities associated with the transition to a lower-carbon economy. Through engagement, we aim to understand how companies manage climate-related risks and opportunities and seek disclosure in line with our guidance.

Some investors engage with companies and execute their voting rights at shareholder meetings themselves, but many rely on third-party proxy advisors or their asset managers. For clients that wish to take a different approach, we also offer a proxy voting program that gives investors the choice to select from a variety of voting policies to direct the proxy voting of shares held in the eligible funds and segregated accounts they own.

For our investors, and an increasing number of regulators, accurate reporting is key to ensuring strategy effectiveness. Various metrics such as those outlined by the Task Force for Climate-Related Financial Disclosure (TCFD) and a broader, wide range of climate profile statistics are available.