Managing more than US$1 trillion of diverse assets for its clients around the globe, Invesco is analysing the impact of climate change on its holdings and operations. Invesco published today itsClimate Change Report*, the first comprehensive assessment of the global asset manager’s ESG strategies in line with the TCFD (Task Force on Climate-related Financial Disclosures) framework. Reporting of this type is expected to become the benchmark with the likelihood thatTCFD’s framework will become a globally adopted standard in the coming months.
The report also sets out Invesco’s assessment of a significant part of its listed equities and corporate fixed income holdingsconcerning emissions intensity, temperature alignment and climate scenario analysis. The focus on the most relevant portfolios by regional composition and sizeputs Invescoamongthe first leading investment managers to conduct scenario analysis of this type.
In the forward to the report, Martin L. Flanagan, President and CEO, Invesco, said:
“This inaugural report describes our approach to assessing and managing climate risks across our investment process and business operations. We see our TCFD reporting as a journey, one that starts with this first Invesco Climate Change Report, defining March 2019 – March 2020 as our base year and setting our ambitions for the future.”
Introducing the inaugural report Cathrine De Coninck-Lopez, Invesco’s Global Head of ESG, said:
“Tackling the climate emergency is arguably everyone’s responsibility. As an investment manager the development of a corporate understanding of the effects of climate change on business, strategy, and financial performance is highly challenging. However, we are committed to meeting that challenge as a business and for our customers. Investors are part of the solution to climate change through supporting and influencing companies that are adapting, transitioning, and allocating capital towards future- proofing our planet.
As a business we are passionate and driven in our commitment to deliver lasting change. This is important to our clients and this report sets out how we are tackling those challenges.”
The report highlights Invesco’s approach to governance and strategy, ensuring that ESG principles are being integrated across the business, engagement with clients, approach to advocacy and investment solutions. Invesco has undertaken an assessment of climate change at the operational level, including metrics covering operational, investment and regulatory risk, and concluding with specific targets going forward.
Also revealed in the report are the results of a quantitative climate scenario analysis of the interaction between climate change and Invesco’s holdings of equity and bond investments under multiple emissions/temperature rise scenarios.
Climate leadership requires collective action
As part of a commitment to leading the standard,Invesco has aligned itself to several global organisations dedicated to driving the climate change agenda.
Invesco isone of a handful of global investment managers working within the One Planet Asset Management Initiative with the goal to advance the understanding of the implications of climate-related risks and opportunities within long-term investment portfolios. This is done through the sharing of responsible investment practices with the Sovereign Wealth Fund members of the One PlanetSovereign Initiative and the publication of relevant research.
Invesco is also a partner of the Climate Bond Initiative, which helps grow a market of green and climate bonds through outreach and education projects centred on growing robust and sustainable green bond markets that contribute to climate action and low carbon investment.
Invesco is a signatory to Climate Action 100+ , which is a global investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change. The firm has also joined theIIGCC (Institutional Investor Group for Climate Change), and the CCRI (Coalition for Climate Resilient Infrastructures), and has been part of aselect group of asset managers and industry players that has helped create the guidance published by the Climate Financial Risk Forum chaired by the Financial Conduct and Prudential Regulatory Authority in the UK.
Why climate scenarios are important
Understanding the implications of future climate risk alongside the current emissions intensity and temperature alignment of investments is a critical part of this report. The scenario analysis pilot project informs Invesco’s thinking as it seeks to develop a more comprehensive climate strategy going forward. This work will help Invesco’sinvestment and risk teams to build forward-looking climate analytical tools, which it is hoped will be the pathway to be able to integrate ESG, particularly climate concerns, in all investment products and solutions by 2023.
Maria Lombardo, Invesco’s Head of ESG Climate Strategies EMEA, said:
“Our scenario analysis exercise offered evidence and clear directions to address climate change risks andopportunities for our clients and their investments.”
Commenting on what this means for investors in the Middle East, Zainab Kufaishi, Head of Middle East and Africa at Invesco, said:
“At Invesco we believe the issues of climate change should be top of the agenda for us as a society and for our clients. The responsible investing evolution has gained momentum in the Middle East, and the actions and decisions of influential investors in this region are increasingly shaping the future of companies. ESG integration is now widely seen as part of our fiduciary duty. Though the region is still in its initial phase when it comes to adopting such strategies into portfolios, investors understand that portfolio performance can benefit if investment decisions consider financial risk factors associated with ESG topics. Our recent IGSAMS study of sovereign asset managers revealed that climate change and the rise of natural disasters is significant concern for investors in this region, causing them to adopt investment strategies that implement climate-related risk into the wider investment process. Multiple sovereign entities across the region have already begun to prioritize these issues through organisational-level commitments and government-sponsored initiatives.”
Invesco is committed to reporting annually on its climate change strategies, and the impact this is having on its clients, employees, key stakeholders, and the global business.