Border to Coast – ESG Club interview


We believe in engagement as a tool to influence change in company behav- iours. As mentioned, stewardship and engaging with our investee companies is crucial for us to meet our net-zero goal. We have four priority engagement themes: low carbon transition being one, with others focused on diversity, labour, waste and water. We have increased the size of the respon- sible investment team during the past year and now have a stewardship special- ist supporting our approach. We also have an external engagement provider engag- ing on a broader range of ESG topics. It’s important that stewardship – voting and engagement – is incorporated into investment decision making and isn’t something that’s siloed. That’s why our portfolio managers are involved in voting decisions and engagement meetings.


the oil and gas and banking sectors. We have pre-declared our voting intentions ahead of some key meetings.


As part of our net-zero goal, we have set short and medium-term emission reduc- tion targets covering our in-scope assets. We monitor our metrics on a quarterly basis and report annually through our cli- mate change report. We have already made big cuts since 2019 and are confident of meeting our 2025 and 2030 targets.


What are the biggest challenges within that plan? It’s important that we look at forward- looking metrics where possible and not just focus on carbon metrics and foot- printing. Carbon data can be out of date and doesn’t reflect the transition plans companies have in place. We use tools available such as the Transi- tion Pathway Initiative tool, the Climate Action 100+ net zero company bench- mark indicators along with other data metrics to assess where companies have made commitments to being net zero.


We need all sectors of the economy to make and enable the transition. Rather than excluding entire sectors we need to assess where companies have credible plans. Otherwise, there’s a risk that we could end up restricting the investment universe unnecessarily and have concen- trated portfolios with the associated in- vestment risk that brings.


Data is still a challenge, especially for more esoteric asset classes. Coverage for fixed income portfolios is improving and we are engaging with external managers to improve our coverage. It is still chal- lenging to get data for some multi-asset credit areas and private markets. We are supporting initiatives such as the ESG Data Convergence Initiative for pri- vate markets, and the Assessing Sover- eign Climate-Related Opportunities and Risks (ASCOR) project for sovereign bonds to try and correct this.


You also have a big focus on stewardship. How does that fit into your commitment to ESG?


You have alluded to it, but data is often cited as a big problem within ESG. How can this be addressed?


Data is a challenge. There is a lack of standardisation leading to quality and credibility issues. Coverage can vary sig- nificantly across different markets, espe- cially in emerging markets, and method- ologies also vary between data providers. Arguably data is still an issue for carbon and monitoring climate risk, but this is an even bigger challenge when looking at nature-related data and future disclosures for the Taskforce on Nature-related Finan- cial Disclosures. Having a standardised approach is criti- cally important, this is hopefully being addressed through having a global base- line for sustainability disclosures, which should improve the quality of disclosures and decision-useful information for investors.


Will investors using engagement to change company attitudes to ESG move the dial on climate change issues?


As long-term investors, we have chosen to use the strength of our collective voice to


Issue 124 June 2023 | portfolio institutional | 35


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