ESG Clarity is exploring the decarbonisation targets set by Net Zero Asset Managers’ initiative (NZAM) firms as well as talking to individual fund groups about how they are finding the journey to net zero.
See also: – ESG Clarity’s Net Zero Database
Here, Katie Woodhouse (pictured), climate and data analyst at asset manager WHEB, describes the scope of the firm’s net-zero ambitions, challenges it faces and the frustrations it has with some of its fellow signatories.
How have you found process of creating net-zero targets?
The main frustration has been the calculation of portfolio emissions. We explored a number of different solutions and found there was a significant lack of consistency across data providers, with each one using different techniques to estimate emissions.
Similarly, on the operational side, there are a large number of assumptions that are required to calculate Scope 3 emissions. We rent office space in a shared building and there are huge savings that can be made by changing our electricity provider (we currently use REGOs but would hope to switch to an energy provider that produces their own renewable electricity), however this would require a large amount of encouragement and engagement with our landlord to persuade them to change.
How have you used third-party support to build integrity in your net-zero target?
The Carbon Trust provided assurance that our data and calculations of avoided emissions, and other positive impact indicators, were reasonable and fit for purpose for use in our annual impact report. This is the second year it has provided this assurance for us. And in this second year it has confirmed the quality of the data and calculations used have improved. The main driver of this improvement was an increase in the data available, plus more robust calculations and sources where the data has been estimated.
We have also used Impact Cubed to provide our Scope 3 category 15 (investments) emissions. We have committed to having our targets validated by the Science-Based Targets Initiative and are disclosing to the CDP for the first time in 2022 for reporting year 2021.
Any thoughts on the progress of the Net Zero Asset Managers Initiative as a whole?
The NZAM is a great tool for asset managers to remain accountable throughout their net-zero journey. As of May 2022 the initiative has commitment across the industry from 273 asset managers with a total of $61trn in AUM. We’ve found it a useful source of information, especially its bi-weekly net-zero surgeries.
As a small firm with fewer than 20 employees, we do find the reporting requirements to be significant. Our annual impact report contains the data needed to comply with the Taskforce for Climate-related Financial Disclosures as well as the NZAM. However, the initiative has also requested we file a disclosure to the CDP this year, which has taken up significant resource.
Our main frustration with the initiative is that a lot of the larger asset managers have signed up for only a small proportion of their total assets and have not changed their policies covering the majority of their assets. Vanguard was recently in the press to say it will continue to invest in new fossil fuel exploration, which is clearly inconsistent with the science. There may be scope to tolerate these inconsistencies in the short term, but these cannot be allowed to persist for long.
What has been biggest challenge in decarbonising your portfolios?
The nature of WHEB’s investment strategy means the companies we invest in can have significant emissions as they are contributing to the transition to a low-carbon economy. A large weighting of the portfolio is in industrial companies that make equipment that helps save carbon emissions. For example, First Solar is a company that makes solar modules and is the fifth largest contributor to the strategy’s carbon footprint.
See also: – Q&A with WHEB’s Ted Franks: ‘There is a deeper purpose to impact investing’
Therefore, rather than divesting from those companies with large footprints, we aim to engage and monitor their net-zero carbon progress. Unfortunately Scope 1 and 2 emissions reporting does not cover these wider issues. It has been a challenge to get clients, standard setters and regulators to look beyond Scope 1 and 2 to understand this additional context.
Our 2025 goal is to have at least 50% of investee companies committed to achieving net-zero emissions by 2050, and more than 30% of the portfolio invested in companies offering climate solutions. By 2030 we want 100% of investee companies committed.
How do you build net zero into the culture of the firm?
To encourage employees to use lower-carbon travel, we offer extra holiday time if they choose to travel to their destination overland, and for business travel employees are required to use trains for journeys under six hours.
Where short-haul flights are used, an internal carbon levy of £100 per flight is charged that is then invested in the company’s corporate social responsibility activities. In addition, we set an annual overall GHG budget that covers all of our travel. This budget is set annually and is reduced by at least 10% over each annual cycle. All business travel is offset with Gold Standard Carbon Offset providers.
Additionally, we monitor our waste with the aim to reduce the amount that is sent to landfill. In regards to category 1 of our Scope 3 emissions (purchased goods and services), we monitor the emissions of all suppliers for which our annual spend is greater than £10,000. In most cases, this requires significant engagement to encourage suppliers to begin to calculate emissions, and set science-based targets to reduce emissions.
WHEB’s net-zero goals
| When did you sign up to the NZAMI? | WHEB is a founding member of NZAMI and signed up in mid-December 2020 |
| AUM committed to net zero (£) | 1.36bn (as at 30 June 2022) |
| % AUM committed to net zero | 100 |
| Timeframe | WHEB has committed to becoming a Net Zero Carbon business by 2025 |
