Climate Change Data

Environmental Metrics

ESG Focus Areas

• Governance
• Environmental
• Social

Climate Goals & Targets

Environmental Challenges

• Economic impact of extreme weather events (natural disasters resulting in loss of lives and damages)
• Rising greenhouse gas emissions and climate change impacts on temperature, sea level, soil quality, and weather patterns
• Weak governance in developing countries leading to higher levels of migration, underemployment, inequality, and marginalization
• Vulnerability of developing countries to environmental and social shocks due to weak governance, environmental stress, and social strain

Mitigation Strategies

• Building infrastructure to advance living standards of vulnerable populations
• Investing in education and well-being of lower-income residents and diversifying employment opportunities
• Implementing adaptation policies, emissions reduction strategies, and investments in energy-efficient technologies
• Raising awareness and building capacity at sovereign and municipal levels
• Seeking global support and financing for initiatives

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Natural disasters

Environmental Metrics

ESG Focus Areas

• Climate change
• Diversity, Equity and Inclusion
• Human rights
• Supply chain management
• Governance

Environmental Achievements

• Reduced energy usage in London office by up to 31% through energy-efficient HVAC
• Diverted 98.1% of fit-out waste from landfill in London office renovation

Social Achievements

• Launched several Employee Resource Groups (ERGs) focusing on gender, ethnicity, and LGBTQ+ inclusion
• London office refurbishment received Ska Gold rating for sustainability and employee well-being

Governance Achievements

• Established ESG Strategic Steering Committee (ESGSSC) for coordination of ESG efforts
• Integrated ESG considerations into investment process across all fixed-income strategies

Climate Goals & Targets

Environmental Challenges

• Data limitations and inconsistencies from third-party ESG data providers
• Challenges in engaging with sovereign issuers due to varying institutional strengths and political factors
• Complexity of integrating ESG requirements into existing portfolios with specific investment objectives

Mitigation Strategies

• Engaging with data providers to improve data quality and consistency
• Developing a proprietary sovereign ESG assessment framework
• Continuous engagement with clients to understand and address their ESG needs and expectations

Supply Chain Management

Responsible Procurement

• Engaging with issuers to improve supply chain transparency and address human rights concerns

Climate-Related Risks & Opportunities

Physical Risks

• Droughts, floods, wildfires, hurricanes

Transition Risks

• Regulatory changes, market shifts related to decarbonization

Opportunities

• Investment in issuers with low carbon intensity

Reporting Standards

Frameworks Used: UN PRI, TCFD, TPI, CA100+, UNGC, EU Taxonomy, ICMA Green Bond Principles, SASB

Certifications: Ska Gold

UN Sustainable Development Goals

• Goal 3
• Goal 5
• Goal 8
• Goal 10
• Goal 6
• Goal 7
• Goal 12
• Goal 13

Western Asset has developed a proprietary UN SDG framework to identify issuers contributing to the advancement of these goals through sustainable practices or bond issuance.

Sustainable Products & Innovation

• ESG-focused investment strategies (e.g., US ESG Core Plus, Global Aggregate ESG)

Awards & Recognition

• Pensions and Investments Best Places to Work in Money Management (7 consecutive years)

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Climate Goals & Targets

Environmental Challenges

• Climate change
• Supply chain issues
• Demographic shifts
• Socioeconomic trends
• Governance risks

Mitigation Strategies

• ESG analysis integrated into investment process
• Monitoring of material social factors (supply chain, employee relations, labor rights, health & safety)
• Considering governance as a standalone risk factor and signal for managing environmental and social issues
• Dialogue with management to understand corporate sustainability initiatives and disclosures
• Requiring wider spreads from issuers lagging in ESG practices
• Rewarding issuers with improving ESG profiles

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: UN Principles for Responsible Investment (PRI)

Environmental Metrics

ESG Focus Areas

• Climate Change
• Governance
• Sustainable Investing

Environmental Achievements

• 100% renewable energy used in London, Singapore, and Tokyo offices
• 27% year-on-year reduction in electricity consumption in Singapore office (as of March 2023)
• 15% reduction in water consumption in Melbourne office
• 36% waste diverted from landfill in Melbourne office
• 34% reduction in emissions in Melbourne office

Social Achievements

• Not disclosed

Governance Achievements

• Established ESG Strategic Steering Committee (ESGSSC)
• Established ESG Cross-Mandate Task Force
• Established Sustainability Risk Team

Climate Goals & Targets

Environmental Challenges

• Significant data challenges and methodological challenges associated with climate reporting in the asset management industry
• Lack of data availability across various sectors in fixed-income markets, especially for Scope 3 emissions
• Limitations in the robustness of third-party climate data

Mitigation Strategies

• Using data from external sources such as MSCI, Bloomberg ESG, World Bank, SBTi, Urgewald and TPI, as well as internal analysis
• Developing numerous tools for climate risk assessment and reporting
• Engaging with issuers to improve data quality and transparency

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Green philosophy and accreditations are considered in the selection process for new suppliers/vendors

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events (floods, droughts)
• Rising sea levels

Transition Risks

• Policy and legal changes
• Technological advances
• Market shifts
• Changes in consumer preferences

Opportunities

• Investment opportunities in low-carbon technologies and solutions

Reporting Standards

Frameworks Used: TCFD

Certifications: BREEAM, LEED Gold, Procel, NABERS

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed