PI Partnership – Newton Investment Management
At Newton, we have taken a random portfolio from across our investment universe and undertaken a temperature alignment analysis of it using three different methodologies: one came out showing it to be aligned with a 1.5-degrees Celsius rise, the second methodology indicated a 2.5-degrees Celsius rise, and the third revealed a rise of 4-degrees Celsius. Given that significant disparity, the natural tendency would be to pick the one with the lowest temperature increase, but because this is a nascent space where methodologies are changing frequently, it is not a question of selecting the one with the best results. Instead, providing a consistent methodol- ogy so investors can make a comparison between different strategies and companies’ ESG credentials is paramount. Once the correct approach has been determined, it needs to be maintained and widely adopted, but we are yet to reach the point at which the best approach has been determined and adopted across all industries, including the investment industry. There are frameworks being developed to this end, notably from CDP (formerly known as the Carbon Disclosure Project), which has been reporting for more than a decade, and which is providing some consistency because it requires companies to report against its framework. However, the CDP framework is not being reported consistently across different jurisdictions – a requirement for most global investors.
Setting the standard At the United Nations Climate Change Conference (COP26) last November,
the
International Sustainability Standards
Board (ISSB) was created to work alongside the long-standing International Financial Reporting Standards (IFRS) on accounting standards.
The ISSB will be convening soon to establish a board which should start producing a framework and methodologies during the next 18 months to two years, so that companies can be pro- vided with a useful structure and guide rails to determine the qualitative factors needed for consistent and efficent ESG data reporting. Accounting frameworks and standards have been in place for over a century, and while there are no agreed accounting stand- ards for ESG considerations as yet, we believe a shift in momentum is finally under way. As a member of the IFRS Advisory Council, I see first-hand how various parts of the accounting standards framework are under constant and thorough scrutiny and review to find the path of best fit across all stakeholders. We believe the ISSB will ultimately follow a similar model, using stakeholder inclusion to arrive at the best possible frame- work to ensure a level of consistency for the global ESG rating of individual companies.
Important information This is a financial promotion. These opinions should not be construed as investment or other advice and are subject to change. This material is for information purposes only. This material is for professional investors only. Any reference to a specific security, country or sector should not be construed as a recommenda- tion to buy or sell investments in those securities, countries or sectors. Newton manages a variety of investment strategies. Whether and how ESG considerations are as- sessed or integrated into Newton’s strategies depends on the asset classes and/or the particular strategy involved, as well as the research and investment approach of each Newton firm. ESG may not be considered for each individual investment and, where ESG is considered, other attributes of an investment may outweigh ESG considerations when making investment decisions. Issued by Newton Investment Management Ltd. ‘Newton’ and/or ‘Newton Investment Management’ is a corporate brand which refers to the following group of affiliated companies: Newton Investment Management Limited (NIM) and Newton Investment Management North America LLC (NIMNA). NIMNA was established in 2021 and is comprised of the equity and multi-asset teams from an affiliate, Mellon Investments Corporation. In the United Kingdom, NIM is authorised and regulated by the Financial Conduct Authority (‘FCA’), 12 Endeavour Square, London, E20 1JN, in the conduct of investment business. Registered in England no. 01371973. NIM and NIMNA are both registered as investment advisors with the Securities & Exchange Commission (‘SEC’) to offer investment advisory services in the Unit- ed States. NIM’s investment business in the United States is described in Form ADV, Part 1 and 2, which can be obtained from the
SEC.gov website or obtained upon re- quest. Both firms are indirect subsidiaries of The Bank of New York Mellon Corporation (‘BNY Mellon’).
Feb 2022 portfolio institutional roundtable: Sustainable investing
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