Climate Change Data

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity & Inclusion
• Responsible Business Practices
• Human Rights
• Social Impact

Environmental Achievements

• 213 GWh of renewable energy generated
• 33 million metric tonnes of CO2e emissions avoided

Social Achievements

• 5,300 hours of employee training delivered
• 177 thousand patients receiving healthcare through portfolio companies' initiatives
• $200 million donated by Humana, along with other support initiatives

Governance Achievements

• Active engagement with portfolio companies on ESG issues, resulting in improvements in diversity and reporting

Climate Goals & Targets

Environmental Challenges

• Lack of comprehensive sustainability reporting by some portfolio companies
• Addressing climate-related risks and opportunities within the portfolio

Mitigation Strategies

• Active engagement with companies to improve reporting and sustainability practices
• Implementation of a low-carbon investment approach, including exclusions and engagement on carbon reduction
• Use of scenario analysis and stress testing to assess climate-related risks

Supply Chain Management

Responsible Procurement

• Engagement with companies on human rights and supply chain sustainability

Climate-Related Risks & Opportunities

Physical Risks

• Acute and chronic physical risks considered through ESG analysis and hazard maps

Transition Risks

• Policy and legal changes, technological advancements, market shifts

Opportunities

• Investment in companies contributing to the transition to a low-carbon economy

Reporting Standards

Frameworks Used: TCFD, UN SDGs, CDP, GRI

Certifications: CarbonNeutral®

UN Sustainable Development Goals

• All 17 UN SDGs

Portfolio contributes to all 17 SDGs, although contribution varies across goals due to reporting limitations.

Awards & Recognition

• Bloomberg’s 2020 Gender-Equality Index
• 100% score on the 2020 Corporate Equality Index

Environmental Metrics

ESG Focus Areas

• Climate Change
• Biodiversity
• Diversity & Inclusion
• Supply Chain Management
• Corporate Reporting

Environmental Achievements

• 151,827 tonnes of CO2e avoided
• 334,493 MWh of renewable energy generation

Social Achievements

• Increased employee headcount by 1.5% more per year on average than the benchmark for the previous five years
• Donation to Durrell Wildlife Conservation Trust

Governance Achievements

• Portfolio significantly outperforming the benchmark on MSCI ESG Controversy Score
• Voted on every votable item in 2021

Climate Goals & Targets

Environmental Challenges

• Lack of quality carbon data
• Challenges in measuring scope 3 emissions
• Data completeness and validation remain a challenge
• Supply chain disruptions due to Covid-19
• Difficulty obtaining data from several entities for Nidec

Mitigation Strategies

• Using data from two providers, ISS and MSCI
• Engaging with companies on quality reporting
• Engaging with companies on their response to the global pandemic
• Implementing initiatives such as ESG due diligence when evaluating potential candidates and post-acquisition data correction exercises for Nidec
• Continued engagement with Nidec to improve the quality of its emissions reporting

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme heat
• Coastal flooding
• Tropical cyclones

Transition Risks

• Policy and legal changes
• Technology shifts
• Market shifts
• Increased carbon taxes

Opportunities

• Technological opportunities from patents and the expansion of existing green revenues
• Increased demand for renewable energy and water management services

Reporting Standards

Frameworks Used: TCFD, CDP, GRI, SASB, UNGC, SFDR

UN Sustainable Development Goals

• All 17 SDGs

Investment process and active engagement with portfolio companies

Environmental Metrics

ESG Focus Areas

• Climate Change
• Corporate Governance
• Human Capital and Diversity
• Controversies
• Disclosure and Transparency
• Business Ethics

Environmental Achievements

• 94.4% of portfolio companies disclosed to CDP in 2022, exceeding the benchmark of 85.9%
• 59.5% of portfolio companies have set science-based targets, and an additional 16.1% have committed to setting them, exceeding the benchmark of 54%

Social Achievements

• Portfolio significantly outperforms benchmark on UN Global Compact signatory percentage
• Portfolio demonstrates better female representation on company boards than the benchmark, exceeding the FTSE Women Leaders Review recommendation

Governance Achievements

• Portfolio's average CEO tenure is higher than the benchmark
• Portfolio's average R&D spend as a percentage of revenue is higher than the benchmark

Climate Goals & Targets

Environmental Challenges

• MSCI identifies Coastal Flooding as a risk for some holdings with large property or infrastructure footprints
• MSCI analysis identifies extreme heat and tropical cyclones as primary physical risk hazards

Mitigation Strategies

• Further analysis of extreme heat and tropical cyclone risks prompted by MSCI findings
• Engagement with portfolio companies on carbon reduction and elimination
• Incorporation of policy and legal changes into investment strategy through continuous improvement
• Avoidance of high-carbon emission industries and technologies
• Use of scenario analysis to understand the effects of different transitions to a low-carbon economy

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Coastal Flooding
• Extreme Heat
• Tropical Cyclones

Transition Risks

• Policy changes
• Technology shifts
• Market shifts

Opportunities

• Low-carbon technology transition

Reporting Standards

Frameworks Used: TCFD, UN PRI

Environmental Metrics

ESG Focus Areas

• Climate change
• Diversity, Equity & Inclusion (DE&I)
• Corporate governance

Environmental Achievements

• More than 1,000 ESG company engagements in 2023 where ESG topics were part of the discussion
• Integration of financially material ESG considerations into investment methodology across 84% of firm-wide AUM.
• Progress seen from three oil & gas companies on methane emission disclosure and addressing the issue across their global assets; two of the three now provide investors with a breakdown of methane released from both operated and non-operated assets.
• Hosted a client event titled ‘Uncharted Waters’ focusing on water security in water-intensive sectors.

Social Achievements

• Over 1,000 documented ESG engagements across a variety of topics in 2023.
• Thematic engagement with UK companies to understand how they are addressing the root causes of the gender pay gap.
• Continued monitoring of company updates on the prevalence of sexual harassment in the mining industry and progress on implementation plans.
• Leading engagement with a large US pharmaceutical company on access to medicine.
• Launched a series of engagements focusing on responsible AI across 12 technology companies.

Governance Achievements

• Voted at approximately 6,000 meetings with over 64,000 items.
• Continued to be a signatory of the Financial Reporting Council’s UK Stewardship Code.
• Engagement with board leadership of various UK and European companies on board composition, corporate strategy, succession planning, and ESG risk management.
• Collaborative engagement through the UK Investor Forum and the Asian Corporate Governance Association to discuss governance issues with certain companies.

Climate Goals & Targets

Environmental Challenges

• Biodiversity loss due to land use change, climate change, pollution, and invasive species.
• Water scarcity due to climate change and increasing demand.
• Deforestation driven by agricultural activities.
• Lack of progress in DE&I in some sectors.
• Challenges in managing responsible AI practices.
• Persistent operational shortcomings in the UK water sector.
• Value destructive acquisitions proposed by some companies.
• Concerns over executive remuneration and alignment with performance.

Mitigation Strategies

• Joining collaborative initiatives like the UN Principles for Responsible Investment’s Nature Reference Group and Nature Action 100 to address biodiversity loss.
• Engaging with water-intensive companies to improve water management practices and reduce water footprint.
• Engaging with consumer goods companies on deforestation-related risks and traceability in supply chains.
• Engaging with companies on DE&I initiatives, including addressing gender pay gap and sexual harassment.
• Developing engagement questions and launching engagements focusing on AI ethics and practices.
• Collaborative engagement with UK water utilities to improve environmental performance and limit sewage discharges.
• Engaging with companies on proposed acquisitions and voting against those deemed value destructive.
• Engaging with companies on executive remuneration policies and advocating for stronger alignment with performance.

Supply Chain Management

Responsible Procurement

• Engaging with companies on human rights policies and traceability technologies in supply chains.

Climate-Related Risks & Opportunities

Physical Risks

• Physical impacts of climate change on businesses and society

Transition Risks

• Government policies and market shifts related to energy transition

Opportunities

• Opportunities for companies embracing circular economy principles

Reporting Standards

Frameworks Used: Principles for Responsible Investment (PRI)

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity, Equity & Inclusion (DEI)
• Governance
• Supply Chain Management
• Biodiversity

Environmental Achievements

• Portfolio outperforms benchmark by over 60% on carbon intensity and carbon footprint (Scope 1 & 2); ITR of 1.7 degrees compared to benchmark's 2.5 degrees.
• Almost 30% of the portfolio committed to net-zero carbon (Scope 1 & 2) by 2030.
• Over half of holdings have approved SBTi targets.
• Significant strides in enhancing board gender diversity.

Social Achievements

• Proportion of UN Global Compact Signatories increased by 8% from last year.
• Improvement in board gender diversity (1.56% increase since last year).
• Portfolio experiences considerably fewer human rights and labor rights controversies than the benchmark.

Governance Achievements

• Fewer overboarded non-executive directors than the benchmark.
• Higher exposure to governance leaders and less exposure to laggards.
• Exceeds benchmark in business ethics and ownership and control scores.

Climate Goals & Targets

Environmental Challenges

• Slight rise in controversy cases compared to the previous year, particularly concerning supply chain labor standards.
• Allegations of forced labor related to suppliers employing ethnic minorities in some holdings (Aptiv, Microsoft, Nintendo).
• Increased emissions reported by some holdings (Lam Research, Texas Instruments, Murata Manufacturing, Home Depot) since last September, although overall intensity decreased.

Mitigation Strategies

• Engaged with holdings flagged for controversies to ensure effective addressing of issues.
• Enhanced supply chain practices will continue to be a key focus of engagement efforts.
• Divestment from DS Smith (one of the highest emitters).
• Engaging with companies on climate targets and challenges associated with Scope 3 reductions (Saint Gobain, Prysmian, Aptiv, ASML, Lam Research).

Supply Chain Management

Responsible Procurement

• McCormick has a robust sourcing program to improve sustainability of farming practices.
• Home Depot is exerting influence over its supply chain to adhere to high environmental standards.

Climate-Related Risks & Opportunities

Physical Risks

• Exposure to physical risks of climate change (T-Mobile)

Transition Risks

• Policy risks resulting in assets being impacted by societal and economic shifts towards a low-carbon future.

Opportunities

• Technological opportunities such as innovations in clean technology.

Reporting Standards

Frameworks Used: UN Sustainable Development Goals (SDGs), SBTi

Certifications: ISO 27001:2022 (T-Mobile)