Global listed infrastructure companies will be key to helping the world reach the goals of the Paris Agreement, and many are achieving very strong results in reducing their emissions, says Andrew Maple-Brown, Co-Founder and Managing Director of Maple-Brown Abbott Global Listed Infrastructure.
However, there are some that still have considerable work to do in order to achieve their ambitions, and the risk of greenwashing persists.
“For this reason, active investors have a crucial role to play in helping companies achieve their net zero ambitions, through engagement, scrutiny and constructive encouragement.
“While many companies have outlined some variation of a net zero target, there are notable inconsistencies between what is being said and what is actually being done.
“As investors, we believe it is vital to assess the financial impact of any targets as they can mean different things to different people, and any disconnect between claim and reality is a potential risk.
“We have found it is useful to have a degree of scepticism about the claims made, and to ask some tough questions of management in order to work out whether their statement of intent is authentic and achievable.”
Mr Maple-Brown says that as active investors, the intention isn’t to discourage companies from setting net-zero targets but to encourage and support them.
“We have a number of examples where we have worked closely with companies to better understand their targets and help them identify ways to achieve them.”
Georgia Hall, the Global listed Infrastructure team’s ESG Analyst, has found that these discussions are becoming much more welcome and fruitful.
“Even in the past 12 months, we have found that companies that were initially reticent to engage on certain topics – such as scope 3 emissions – are now much more open and willing to take on more accountability. We’ve engaged with well over three-quarters of portfolio companies on emissions targets and decarbonisation.
“Nonetheless, one of the key challenges we continue to face is that there are no globally accepted and mandated standards for companies when setting net zero targets, which means many lack external and independent accreditation”, Ms Hall says.
Maple-Brown Abbott Global Listed Infrastructure recently became a signatory to the Net Zero Asset Management Initiative which calls on managers to align investments with net zero emissions by 2050 or sooner to support global efforts to limit warming to 1.5 degrees Celsius by mid-century.
Mr Maple-Brown says that by joining this initiative, Maple-Brown Abbott Global Listed Infrastructure is formalising its commitment to managing climate change risks and opportunities, and influencing the pace of decarbonisation through active engagement.
“We recognise the role we have in facilitating the decarbonisation of our clients’ assets, and joining this initiative gives us access to global best practice tools and resources.”
Key areas that Maple-Brown Abbott looks at when engaging with companies include:
- how aligned the target is with the long-term temperature goal of the Paris Agreement, time frames, and unit of measurement
- what it covers and whether it includes all business operations, subsidiaries, and geographies. In addition, how valid the baseline year is
- which emissions scopes are captured and whether the target is limited to CO2 or other greenhouse gas emissions, such as methane emissions
- whether the real economy emissions are being managed downwards, and whether offset measures are heavily relied on and/or ‘emissions avoided’ are factored in
- what accreditations or reporting frameworks are used
- any track record of emissions reduction prior to targets being announced
- how detailed the plan is, whether there is a meaningful interim target, and how accountable the management team is and how they are being incentivised.
“Overall, we believe that investing in the transition to a net zero economy, and managing climate-related risks, will deliver better long-term results for investors. And as active managers, we have the opportunity to engage with companies and help ensure they are achieving their net zero goals, thus boosting returns and better managing risk,” Mr Maple-Brown said.
Georgia joined Maple-Brown Abbott in June 2020 as a dedicated ESG Analyst on the Global Listed Infrastructure team. Prior to joining Maple-Brown Abbott, Georgia worked as a Senior Manager for two years, ESG and Corporate Responsibility at the Commonwealth Bank of Australia, where she was responsible for the Group’s Environmental and Social Policy, climate change risk analysis and modern slavery program. Before the Commonwealth Bank, Georgia led the Investment Communications team at AMP Capital and worked on the project team to divest $600 million of "unethical" holdings, the launch of a Sustainable Australian Share fund, and oversaw UNPRI reporting. She has held other roles at Ironbark Asset Management in Australia, and Wellington Management and Schroders in the UK.
Georgia
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