Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Climate Goals & Targets

Environmental Challenges

• Data availability limitations, particularly in earlier periods and for emerging markets.
• ESG ratings may not always accurately reflect underlying ESG quality, especially in the US.
• Inconsistent integration of ESG factors by active managers.

Mitigation Strategies

• Utilizing more nuanced approaches to ESG data analysis, such as focusing on ESG momentum or combining ESG data with standard financial metrics.
• Improving the quality and breadth of ESG data.
• Encouraging more consistent integration of ESG factors by active managers.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: MSCI ESG Ratings

Environmental Metrics

ESG Focus Areas

• Climate Change
• Multi-Stakeholder Driven Society
• Resource Degradation
• Demographic Challenges
• Technological Revolution

Climate Goals & Targets

Environmental Challenges

• Climate change impacts on high-carbon businesses and physical assets
• Resource degradation (fish stocks, land, water)
• Unsustainable economic growth model
• Mispricing of sustainability risks due to short-term investment horizons and behavioral biases
• Underestimation of externalities by companies

Mitigation Strategies

• Investing in sustainable solutions and technologies
• Transitioning to a circular economy
• Incorporating sustainability into investment decision-making frameworks
• Addressing externalities and mispriced contingent liabilities
• Focusing on resilient, future-relevant companies

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Rising sea levels
• Increased natural disasters

Transition Risks

• Regulatory changes
• Market shifts towards lower-carbon economy

Opportunities

• Clean energy technologies
• Sustainable business models

Environmental Metrics

ESG Focus Areas

• Social and Environmental Equity (SEE)
• Racial Justice/Equity
• Climate Justice
• Financial Inclusion
• Health and Wellness
• Education/Workforce Preparedness
• Affordable Housing/Physical Security
• Transportation/Sustainable Infrastructure
• Environmental Equity

Social Achievements

• Increased uptake of SII and ESG practices by 65% of institutions in 2022 (29 percentage point increase since 2018).

Climate Goals & Targets

Environmental Challenges

• Risk of investors pausing or reversing course on SEE investments during market volatility.
• Economic downturns exacerbate economic and social inequality.
• Sustainable investing initiatives can be labeled as “idealistic” or “ancillary”.

Mitigation Strategies

• Adopting a more disciplined approach to SEE investing.
• Using a three-step SEE framework to assess investment managers, map strategies, and execute engagement programs.
• Focusing on the intersectionality and interconnectedness of sustainability and impact issues.
• Reframing SEE themes in terms of universal human needs to reduce bias.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Climate Change
• Net Zero

Environmental Achievements

• Moved Boston headquarters to Winthrop Center, a Passive House building using 65% less energy than average commercial space.

Social Achievements

• Not disclosed

Governance Achievements

• Developed new ESG-DEI Manager Assessment Framework including climate competence and net zero assessment.

Climate Goals & Targets

Environmental Challenges

• Lack of universal adoption and standardization of net zero methodologies.
• Data limitations in private markets for assessing climate characteristics.
• Complexity in mapping climate impact onto actionable investment decisions.

Mitigation Strategies

• Developed a Manager Assessment Framework incorporating industry-leading guidance.
• Uses public market proxies for private market climate data where necessary.
• Planning a new research report to simplify net zero strategy and provide actionable implementation paths.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Engaging suppliers to adopt Science Based Targets

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events

Transition Risks

• Shifting regulation
• Technological advancements

Opportunities

• Climate solutions investments

Reporting Standards

Frameworks Used: Paris Aligned Investment Initiative’s Net Zero Investor Framework (NZIF), Institutional Limited Partners Association’s ESG Assessment Framework

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Climate Change
• Net Zero Transition

Environmental Achievements

• More companies will set science-based targets to reduce emissions and develop credible transition plans.

Climate Goals & Targets

Environmental Challenges

• Many companies have yet to feel the full impact of the increased cost of capital.
• Weak loan documentation and an increasing share of loan-only issuers mean defaults will continue to prove more painful for investors.
• Hurdle in the form of public perception, political jockeying, and even securing a steady stream of fuel, as the mining sector remains constrained.

Mitigation Strategies

• Investors will increasingly prioritize persuading their highest emission holdings to adopt SBTs.
• Managers with large operating teams and restructuring expertise, differentiated networks of intermediaries, and connections with large corporates to secure carve out deal flow will have an advantage in this market.
• Investors are leaning into the favorable investment environment while mitigating exposure to nature-related risks.

Supply Chain Management

Climate-Related Risks & Opportunities

Opportunities

• Nuclear energy

Reporting Standards

Frameworks Used: Science-Based Targets (SBTs), International Sustainability Standards Board (ISSB), United Kingdom’s Transition Plan Taskforce, Glasgow Financial Alliance for Net Zero (GFANZ)