Overview of the quarter

The devastation Hurricane Helene was wreaking across the south-eastern United States provided an unsettling backdrop for New York Climate Week, an annual event where business leaders, politicians and other concerned parties from all over the world gather to drive the transition and champion the positive responses already under way.

Climate remains an enduring theme across our engagements. This quarter, we progressed discussions with miners Barrick Gold and Newmont and started a dialogue with Tesco. A year and a half since we set our targets as part of the Net Zero Asset Managers initiative, we continue to develop our understanding of the climate strategies of the companies we invest in and to determine whether they are aligned with the goals of the Paris Agreement.

Over the last year, we have built a framework for assessing the ambition, credibility and scope for value creation of companies’ transition plans, and the Q1 Responsible Investment Report explained why these three pillars are critical to understanding a company’s climate strategy.

This framework has formed the basis of many of our engagements with investee companies. We start with a checklist of five questions which cover: the scope of a company’s greenhouse gas footprint; its Net Zero targets and interim milestones; the incentives for achieving emissions reductions; its use of an internal carbon price; and its use of a marginal abatement cost curve (MACC).1 We encourage our investee companies to publish a MACC to help investors gauge the economic viability of different emissions reduction projects, and discussions of MACCs featured in all three of this report’s engagements in focus.

To complement our engagement with companies, we have written a position statement entitled Climate strategy and competitive advantage. This sets out what we look for in a climate strategy and what we want companies to disclose. The answers to our questions help us to determine how effective a climate strategy is. Do the company’s preparations for the risks of global warming give it a competitive advantage? Or is it at risk of long-term underperformance?

1 A chart showing the cost and emissions reduction of projects a company could implement to decarbonise