Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Rising interest rates due to Federal Reserve policy.
• Escalating trade war between US and China.
• High levels of consumer debt.
• Slow wage growth despite strong job growth.
• High housing prices and low affordability.
• Rising corporate borrowing costs.
• Maturing debt load in China.

Mitigation Strategies

• Not disclosed

Supply Chain Management

Supplier Audits: Not disclosed

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Social Impact
• Climate Change
• Governance (Proxy Voting)
• Diversity & Inclusion

Environmental Achievements

• Reduced GHG emissions and water intensity of portfolio through divestments (quantified in Figure 4, but specific numbers not provided).

Social Achievements

• Highlighted numerous social impact initiatives of portfolio companies in response to the COVID-19 pandemic (detailed in Table 1), including employee support, community aid, and healthcare contributions.
• Supported employee volunteerism through paid volunteer days and the Coho Cares initiative.

Governance Achievements

• Active engagement in proxy voting, resulting in higher support for shareholder proposals and stricter criteria for board commitments than S&P 500 averages (detailed in Figure 5, Figure 6, and Figure 7).

Climate Goals & Targets

Environmental Challenges

• Lagging pace of climate change mitigation efforts in some portfolio energy companies.
• Slow implementation of energy consumption and waste reduction projects by Lowe's.
• SJM's lagging sustainable coffee sourcing strategy compared to peers.

Mitigation Strategies

• Divestment from Royal Dutch Shell and Occidental Petroleum due to insufficient pace of sustainability efforts.
• Engagement with portfolio companies to improve disclosure, set targets, and report on progress (examples: SJM, Sysco, Lowe's).
• Active engagement with companies to adopt TCFD recommendations.

Supply Chain Management

Responsible Procurement

• Sustainable coffee sourcing (SJM)
• Sustainable sourcing commitments (Sysco)

Climate-Related Risks & Opportunities

Physical Risks

• Supply chain disruptions from extreme weather

Transition Risks

• Regulatory changes
• Market shifts

Opportunities

• Energy-efficient products
• Renewable energy investments

Reporting Standards

Frameworks Used: TCFD

Sustainable Products & Innovation

• Energy-efficient dishwashing equipment (ITW)
• Battery-powered Ground Power Units (ITW)
• Environmentally preferable products (Grainger)

Environmental Metrics

ESG Focus Areas

• Climate Risk
• Diversity & Inclusion
• Corporate Governance
• Sustainable Sourcing
• Executive Compensation
• Access to Medicine

Environmental Achievements

• 93% of ESG portfolio holdings disclose emissions and have goals to reduce emissions
• State Street achieved carbon neutrality in 2020 (Scope 1 & 2)
• Marsh & McLennan achieving carbon neutrality in 2021 (Scope 1 & 2, partial Scope 3)
• US Bancorp exceeding initial carbon reduction goals, working towards net-zero target
• Unilever setting net-zero emissions target for 2039
• Colgate-Palmolive setting net-zero emissions target for 2040
• W.W. Grainger achieving 33% reduction in scope 1 and 2 emissions (ahead of schedule), working towards 30% reduction by 2030

Social Achievements

• Increased focus on enhanced disclosure of key topics like climate risk and diversity across portfolio companies
• 50% of Coho's ESG portfolio holdings disclosed or planned to disclose EEO-1 reports
• Engagement with companies to promote diversity through workplace policies and programs, improved disclosure, and goal setting
• Several portfolio companies enhanced corporate governance and board quality (Ross Stores, Microchip Technology)
• Advancement of capable women executives into senior leadership positions (CVS, UPS, W.W. Grainger, Merck, Thermo Fisher)
• Over 400 hours of employee volunteer work through Coho Cares Cup

Governance Achievements

• Global Payments made several changes to improve corporate governance (annual elections of directors, increased Board diversity, appointed a lead independent director)
• Dollar General published its third CSR report, disclosing GHG emissions metrics and incorporating the SASB framework
• Several portfolio companies improved board independence, reduced average board tenure, and improved diversity
• Increased engagement with companies to refine inputs for qualitative assessments and advocate for positive progress on key ESG metrics and enhanced data disclosure
• Active proxy voting promoting accountability, diversity, and sustainability

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions due to climate events
• Difficulty in quantifying Scope 3 emissions, particularly in the Financials sector
• Challenges in achieving net-zero targets across different sectors due to varying operations, supply chains, and technologies
• Skills gap in finding workers with necessary technical and interpersonal competencies
• Access to medicine in low- and middle-income countries

Mitigation Strategies

• Increased disclosure on climate risk as prudent risk management
• Adoption of an analytical framework to objectively assess progress and guide engagement efforts
• Engagement with companies to establish science-based targets for emissions reductions and announce net-zero carbon emission targets
• Advocating for companies to reduce the energy intensity of internal operations and ask the same from their investees
• Partnering with organizations like the Access to Medicine Foundation to address access to medicine challenges
• Portfolio companies implementing various initiatives to improve diversity, equity, and inclusion
• Lowe's Companies' Track to the Trades program to address skills gap

Supply Chain Management

Responsible Procurement

• Engagement with top suppliers to implement effective scope 3 framework (W.W. Grainger)

Climate-Related Risks & Opportunities

Physical Risks

• Disruptions in raw material and commodity supply chains
• Increased operational costs from explicit pricing of carbon costs
• Jeopardized physical manufacturing locations

Transition Risks

• Changes in consumer preferences
• Higher cost of capital for energy companies reliant on fossil fuels

Opportunities

• New markets for energy-efficient solutions and products
• Investments in renewables and other clean-energy technologies

Reporting Standards

Frameworks Used: SASB, TCFD, UN Sustainable Development Goals

UN Sustainable Development Goals

• Goal 3: Good Health and Well-being
• Goal 7: Affordable and Clean Energy
• Goal 13: Climate Action

Initiatives related to access to medicine, renewable energy, and carbon emissions reduction

Sustainable Products & Innovation

• Microchip's low-power devices
• Stanley Black & Decker's eco-friendly hand and power tools
• W.W. Grainger's Environmentally Preferable Products (EPP) portfolio

Environmental Metrics

ESG Focus Areas

• Board diversity
• Sustainability metrics in compensation plans
• Emissions reduction targets (Scope 1, 2, and 3)
• Net-zero commitments
• Diversity, equity, and inclusion (DEI)
• Executive compensation
• Sustainability disclosure
• Access to healthcare
• Access to fresh food

Environmental Achievements

• 100% of Coho ESG companies have boards with 20% or more women (Q1 2022)
• Portfolio companies expanding beyond GHG emissions disclosure to set Scope 1, 2, and 3 emissions reduction targets and net-zero commitments
• 68% of portfolio companies reporting against TCFD as of Q2 2022 (up from 14% in 2020)
• 39% of portfolio companies with SBTi commitments or approved targets by Q2 2022
• Decrease in GHG intensity for the portfolio over the past few years

Social Achievements

• 80% of Coho's ESG portfolio holdings have disclosed or plan to disclose data from Employment Information Reports (EEO-1) (compared to 50% last year)
• Increased engagement with companies on board and workplace diversity
• Progress in incorporating sustainability metrics into compensation plans (e.g., Coca-Cola, Amgen)
• Initiatives to improve access to healthcare (value-based care, addressing disparities, pricing and affordability)
• Initiatives to improve access to fresh and healthy food (Kroger, Dollar General)

Governance Achievements

• 100% of Coho companies (as of June 30, 2022) have designated board committees charged with oversight of sustainability
• Improved board disclosure of racial diversity
• Increased racial and gender diversity on boards
• Enhanced proxy voting guidelines to improve board accountability, strengthen the link between pay and performance, and promote sustainability
• Votes against directors who did not meet tenure requirements or have excessive board commitments

Climate Goals & Targets

Environmental Challenges

• Inconsistent and unverifiable ESG data across companies and regions
• Difficulty in calculating Scope 3 emissions for some companies (e.g., U.S. Bancorp, Ross Stores)
• Variances in climate disclosure proposals from SEC, EFRAG, and ISSB
• Potential for greenwashing in net-zero targets
• Disconnect between pay and performance in some companies

Mitigation Strategies

• Encouraging increased disclosure and alignment with TCFD and SBTi standards
• Engagement with companies to improve data accuracy and reporting
• Advocating for a global standard for emissions reporting
• Pushing for validated science-based targets and eliminating carbon credits
• Actively engaging with companies to improve compensation practices and align pay with performance

Supply Chain Management

Responsible Procurement

• Working with suppliers to reduce emissions
• Sustainable sourcing commitments

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD, GRI, SASB, EU Non-Financial Reporting (NFR)

Certifications: SBTi

Environmental Metrics

ESG Focus Areas

• Board diversity
• Carbon footprint
• Net-zero commitments
• Fresh food availability
• Health-care access

Environmental Achievements

• More and more portfolio holdings are joining the net-zero journey, with most having their goals verified by the Science-Based Target Initiative (SBTi).

Social Achievements

• Focus on increasing fresh food availability and expanding health-care access.

Governance Achievements

• 100% of portfolio holdings had at least 20% female board members.

Climate Goals & Targets

Environmental Challenges

• Strong U.S. dollar negatively impacting companies with large overseas revenues.
• Recent dramatic increase in interest rates increasing the probability of a recession.
• Spike in the 30-year fixed mortgage rate crimping would-be homebuyers’ buying power.

Mitigation Strategies

• Portfolio positioning in more demand-defensive sectors to provide good relative results during market corrections.
• Alert for opportunities to improve the portfolio’s return while simultaneously reducing risk.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Science-Based Target Initiative (SBTi)

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance
• Diversity, Equity, and Inclusion (DEI)

Environmental Achievements

• Baxter International (BAX) launched its 2030 Corporate Responsibility Commitment and Goals.
• Sysco (SYY) committed to having 35% of its truck fleet comprised of EVs by 2030.
• Sysco (SYY) is on pace to reach its goal of having suppliers representing 67% of Scope 3 emissions set science-based targets by 2026.
• Lowe's (LOW) reduced Scope 1 and 2 emissions by 49% since 2016.
• Lowe's (LOW) announced its goal to reach net-zero emissions by 2050.
• Medtronic (MDT) set an ambition to achieve net-zero emissions by fiscal year 2045.

Social Achievements

• Nike (NKE) increased women's representation to 51% of employees and 44% of leadership.
• Nike (NKE) increased racial and ethnic minorities' representation to 39% of employees.
• Nike (NKE) invested $149M in community impact.
• Amgen adopted eight solutions to improve pharmaceutical pricing, access, and affordability.
• ConAgra (CAG) ranked #1 by the Access to Nutrition Initiative (ATNI) in percent of sales from healthier products.
• Service Corporation International (SCI) has a diverse workforce with more than half of employees being female.

Governance Achievements

• Johnson & Johnson (JNJ) increased transparency on litigation charges and addressed overboarding issues.
• Johnson & Johnson (JNJ) is exploring adding a formal sustainability metric to executive compensation.
• Cencora (formerly AmerisourceBergen) improved corporate governance by reducing average board tenure and improving executive compensation plan.
• 100% of Coho companies (as of June 30, 2023) have designated board committees charged with oversight of sustainability.

Climate Goals & Targets

Environmental Challenges

• Difficulty in collecting accurate and reliable Scope 3 emissions data.
• High cost of complying with new climate disclosure regulations.
• Varied requirements around Scope 3 emissions reporting globally.
• Political and legal challenges surrounding Scope 3 reporting in the U.S.

Mitigation Strategies

• Using estimation techniques to lessen the burden and cost of Scope 3 data collection.
• Engaging with portfolio companies to improve data accuracy and disclosure.
• Advocating for clearer and more consistent global standards for Scope 3 reporting.
• Monitoring and adapting to evolving regulatory frameworks and disclosure requirements.

Supply Chain Management

Responsible Procurement

• Science-based targets for suppliers (Sysco)

Climate-Related Risks & Opportunities

Opportunities

• Green hydrogen production

Reporting Standards

Frameworks Used: TCFD, SASB, SBTi

Environmental Metrics

ESG Focus Areas

• Environmental, Social, and Governance (ESG)

Climate Goals & Targets

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• ESG qualitative and quantitative framework
• Exclusionary overlay (tobacco, firearms, alcohol, gambling, military weapons, and mining)

Climate Goals & Targets

Supply Chain Management

Climate-Related Risks & Opportunities