Global environment sees 70 per cent of portfolio companies reduce their carbon intensity across Scope 1, 2, and 3 and 70 per cent grow their carbon avoided in 2021, according to Ninety One.
The fourth annual Global Environment Impact Report from Ninety One, which assesses each company’s contribution to a greener future as well as other environmental, social, and governance (ESG) issues, was released today. It contains the company’s “sustainability attribution” for every holding in the Global Environment portfolio.
According to Ninety One, the report shows successful developments among the Global Environment portfolio companies in terms of carbon reporting and environmental impact, demonstrating what can be accomplished by putting a real emphasis on sustainability.
Ninety One global environment co-portfolio manager Deirdre Cooper says: “We have seen further improvements in portfolio companies’ reporting of carbon risk (Scope 1, 2 & 3 carbon emissions) and impact (carbon avoided). Over 95 per cent of companies now report Scope 1 & 2 emissions, and the proportion of portfolio companies providing full carbon-risk reporting is now just over 50 per cent.
“While carbon reporting is improving, we are seeing some meaningful restatements, particularly of Scope 3 emissions, where a change in methodology can result in very different emissions figures. This can make year-on-year comparisons between companies difficult. The fundamental and qualitative analysis of carbon data continues to be a vital overlay.
“Over the past year (i.e., FY2020 vs. FY2019), almost 70 per cent of portfolio companies reduced Scope 1, 2 & 3 emissions intensity, and 70 per cent increased their absolute carbon avoided – a measure of the extent to which a company’s products or services help to reduce emissions relative to the traditional alternative.”
The report also details the investment team’s engagements with portfolio companies, all of which provide products and/or services that contribute to sustainable decarbonisation.
“We continue to work towards improved carbon emissions reporting by our portfolio companies, with a focus on Scope 3 reporting, and towards all companies adopting science-based carbon-reduction targets.
“We have updated our appraisal against the EU taxonomy and continue to estimate that more than 40 per cent of the strategy’s revenues are potentially aligned to the taxonomy (before applying the ‘Do No Significant Harm’ and ‘Minimum Social Safeguards’ tests). However, as we study the related data from the various external data providers and the handful of companies that have reported, it is becoming increasingly clear that there is quite a bit of room for interpretation in the taxonomy data.
“Therefore, it will be quite a while before we have consistent numbers across different companies. 17 portfolio companies (c.68 per cent) currently have explicit carbon-reduction targets, and about 42 per cent of portfolio holdings have targets approved by the Science Based Targets initiative (SBTi). This continues to be our key engagement focus.
“As investors, we don’t seek to appear ‘green’ by minimising our carbon footprint or maximising our ESG ratings. We aim to deliver ‘sustainability with substance’ through an externalities-based approach to research, examining the nonfinancial as well as the financial data and information, assessing each company’s performance in relation to all its stakeholders. That means deep research on the products and services that are helping to avoid carbon. It means studying, within our natural capital analysis, the company’s net zero plan and water data (imperfect though that currently is) and thinking about the company’s and its suppliers’ impact on biodiversity“.