When engaging with companies on climate change, it is important to integrate both the consequences for nature and the principle of a just transition, ensuring companies consider the broader implications of their pathways to decarbonisation.
Feedback loops are common factors of most crises, and the crisis of climate change is no different. In this instance, the rapid loss of natural capital is both caused by our changing environment and a driver of it. Biodiverse ecosystems, such as forests, play a crucial role in regulating greenhouse gases and moderating extreme weather events.
As a result, policymakers, investors, and their clients will increasingly seek to act in a way that conserves natural capital and protects the economic activity that depends on it. The COP15 biodiversity summit in December 2022 is one such example, with pledges to protect 30 per cent of the planet’s lands and oceans by 2030. We wanted to reflect this greater recognition of nature’s part in reaching net zero by making it a key theme of this year’s Sustainable Investing Report.
The linkages between the environment, the economy and people are complex and require considered engagement. When engaging with companies on climate change, it is important to integrate both the consequences for nature and the principle of a just transition, ensuring companies consider the broader implications of their pathways to decarbonisation. The race to net zero can’t afford to leave anyone behind, and it is crucial to address the social and economic challenges for societies impacted by the transition and the need to conserve and replenish large swathes of forest and biodiversity.
As a result, we may be entering a recalibration in how policymakers, companies and markets approach the scarcity of all forms of capital, including the natural, social and environmental resources that form the bedrock of our global economy.
As asset managers, we remain committed to our role in mitigating climate change. We work with policymakers to encourage global alignment on sustainability rules, which cut across areas of corporate behaviour and disclosure, as well as on taxonomies, fund categorisation, and emissions targets. Meanwhile, our corporate access, research capabilities, and scale put us in a credible position to engage with companies on sustainability issues. These engagements inform our proprietary ESG ratings, which typically cover around 4,000 companies1.
As outlined in this report, we continue to evolve our approach to active ownership through a range of strategies deployed at corporate, sector, and system-wide level that seek to achieve better long-term financial, environmental, and social outcomes for our clients and broader stakeholders.
Footnote:
1: As of 31 December 2022; number of companies covered fluctuates as analysts change and update ratings
