Climate Toolkit
Using data and tools to understand the impact of climate on portfoliosWe believe the need to reduce portfolio emissions should not be a constraint imposed on portfolios as much as a consequence of changes to the way investors assess and engage with companies and assets. In answer to this, we developed our Climate Toolkit which aims to provide clients with the information and insight needed to manage climate risks and identify transition opportunities.
This approach also extends to investors’ perspectives on active ownership, which are increasingly focused on how engagement can lead to tangible real-world outcomes that could potentially drive better financial performance.
The Schroders Climate Toolkit
Our proprietary tools and analytics inform our climate approach at each stage
Climate risk exposure | Climate mitigation | Climate outcome | Active ownership |
|---|---|---|---|
Assessing the climate risks and opportunities across portfolios | Analysing company actions to mitigate climate exposures | Monitoring progress against net zero commitments | Data driven insights inform engagement and voting |
Carbon Value at Risk (VaR)* captures the effect of higher carbon prices on a company’s cash flows and valuations. Physical Risk* provides risk scores based on exposure to a range of climate-related hazards. It assesses the cost to insure a company’s assets against physical impact or damage. | Climate Action Tracker* tracks the pace of change across companies including their climate ambition, organizational management, actions and progress | Net Zero Dashboard* helps track company commitments and measure portfolios’ temperature alignment dynamically. It includes financed emissions (carbon footprint) and temperature alignment (implied temperature pathway of our holdings based on their emissions reduction targets) | Various tools and metrics to measure company progress against climate engagement objectives and inform voting decisions |
Influence
To effectively engage with companies on climate-related issues, we have developed a comprehensive framework called the Climate Engagement and Escalation Framework. The framework allows us to engage with companies on climate-related issues and drive positive change. The framework is made up of five key elements:
- Climate expectations: We set four objectives on climate for large and medium companies to align to a net zero pathway
- Company prioritisation and selection: We focus our engagement activity on companies that we believe are highly exposed to, but least prepared for, the climate transition
- Monitoring performance and progress: We monitor company progress against our objectives using our climate tools and dashboards
- Voting policy: Our approach to climate shareholder resolutions, ‘Say on Climate’ votes and voting against board directors
- Escalation practice: We use a range of escalation tactics to take action against companies that do not make progress within a reasonable timeframe.
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Important Information
Source, Schroders, 2024. For illustrative purposes only.
*Note: Our proprietary ESG tools are designed to enhance the research and evaluation process but do not guarantee favourable investment results or the identification of all risk.
Schroders investment products are only available to Permitted Clients as that term is defined by Canadian securities laws. This document does not constitute an offer to buy or sell securities. Qualified investors will receive material documentation containing important information about their investments prior to investing.