ESG Research Update

Update on key sustainability initiatives (Q2 2021)

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Net-zero commitment

In December 2020, Wellington became a founding member of the Net Zero Asset Managers initiative. As of this April, 87 signatories representing nearly US$37 trillion in assets under management (AUM) have signed on.1 We are aligning strategies with a net-zero-by-2050 trajectory and defining climate-action strategies consistent each investment team’s philosophy and process. This November, we will announce the value of the AUM that has been committed, in partnership with our clients, to be managed in line with our net-zero goal, with the expectation of increasing these assets over time.

Climate-risk disclosures

Following the US Securities and Exchange Commission’s (SEC’s) solicitation for comments, we expressed support for mandatory, standardized reporting of greenhouse gas (GHG) emissions (Scope 1, 2, and 3) and other sustainability metrics. We encouraged the SEC to align with disclosure frameworks, including the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB). In the UK, we expect economy-wide climate-risk disclosure by 2025, with other regulatory regimes following suit.

Earlier this year, after reviewing 10-K filings from 100 companies in the S&P 500 Index, we concluded that over 90% of issuers disclosed insufficient location data for us to accurately assess climate risk. To help change that, we recently published P-ROCC 2.0, an update our 2019 Physical Risks of Climate Change framework, explaining why and how executive teams can disclose location data.

Sustainable Finance Disclosure Regulation (SFDR)

In March, the Level 1 requirements of the SFDR took effect. We have transitioned 26 investment strategies to meet Article 8 (“light green”) requirements and four strategies to comply with Article 9 (“dark green”). We expect to include more strategies next year and are reviewing Level 2 requirements for EU Taxonomy alignment and Principal Adverse Indicators (PAIs). We aim to capture new data, enhance reporting, and consider the research implications of these efforts. Finally, updates to the delegated acts for MiFID II, UCITS, and AIFMD detail how to assess, manage, and monitor sustainability risks and assess…

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1Net Zero Asset Managers initiative, as of 30 June 2021.

Our approach to sustainable investing

Authored by
Carolina San Martin, CFA
Director, ESG Research
Andria Weil
Sustainable Investing Policy Manager
Jeff Barbieri
ESG Research Analyst
Jennifer Rynne
ESG Analyst