Our Sustainable Investment Team, along with many other teams at Wellington, aim to assess and monitor the potential effects of climate change as part of our investment processes. The ESG Research Team, in conjunction with these investment teams, uses proxy voting and engagement to drive board accountability for managing company-level climate-risk exposure.
We encourage companies to develop credible climate transition plans and enhance disclosure on carbon emissions. Lagging in this area could eventually translate to higher capital costs related to regulatory risks and carbon-pricing schemes. We expect climate transition plans to be transparent and clearly communicated to stakeholders. At a minimum, we seek robust, straightforward Scope 1 and Scope 2 emissions disclosures, as this data is easy to attain and measurement practices are well defined. If a company’s progress on these issues lags our expectations, we may use our vote to spur action from the board.
We utilized this voting approach when performing our due diligence at a large financial services company in the lead-up to its 2022 annual general meeting (AGM). At the time, the company did not disclose its Scope 1 or Scope 2 emissions, nor did it file with the CDP, a best-practices framework for disclosing environmental data (including from Scopes 1 and 2 emissions). To underscore our aim to hold board members accountable for a lack of progress on their climate transition planning, we voted against the re-election of one of the company’s directors.