Newton has been a long-standing supporter of the Paris Agreement on climate change and believes that it is critical that its financed emissions (the greenhouse gas emissions associated with the investments it makes on behalf of its clients) are addressed through transition plans. It has therefore aligned itself with the Science Based Targets initiative approach which involves a commitment to an interim target of 50% of financed emissions covered by credible transition plans by 2030, and 100% of its financed emissions covered by 2040.
While Newton’s final target of having 100% of its financed emissions covered by credible transition plans by 2040 necessarily implies that all of its global assets under management (AUM) will be committed to net zero emissions by that point, currently 67% of its AUM (as distinct from financed emissions) are subject to the initiative.1 Cash, derivatives, sovereign bonds and certain quantitative solutions within the multi-asset area are excluded until better data and methodologies emerge to address them. Importantly, the firm will focus on ensuring that financed emissions (rather than simply AUM) are covered by net-zero plans.
Commenting on the targets, Euan Munro, Chief Executive Officer at Newton Investment Management, said: “Failure to address climate change will have direct impacts on communities, livelihoods, peace and stability and quality of life, as well as far-reaching implications for people’s investments and savings. A healthy and vibrant world is ultimately a world in which investment goals can better be achieved, and in that context net zero is a vital commitment for us”.
Failure to address climate change will have direct impacts on communities, livelihoods, peace and stability and quality of life, as well as far-reaching implications for people’s investments and savings. A healthy and vibrant world is ultimately a world in which investment goals can better be achieved, and in that context net zero is a vital commitment for us.
Euan Munro, Chief Executive Officer
Therese Niklasson, Global Head of Sustainable Investment at Newton Investment Management, added: “We contribute to meeting the net zero challenge by engaging with clients and the issuers of our portfolio holdings, while taking an investment-led approach in aiming to allocate increasingly to those companies and regions that are demonstrating a commitment to real-world decarbonisation. Achieving net zero involves the whole Newton investment team, including our executive leadership, with our investment-led approach at the heart of everything we do.”
We contribute to meeting the net zero challenge by engaging with clients and the issuers of our portfolio holdings, while taking an investment-led approach in aiming to allocate increasingly to those companies and regions that are demonstrating a commitment to real-world decarbonisation. Achieving net zero involves the whole Newton investment team, including our executive leadership, with our investment-led approach at the heart of everything we do.
Therese Niklasson, Global Head of Sustainable Investment
Three core points
As an active manager, Newton’s focus in setting its targets has been to ensure it invests with purpose and aligns those targets with three core points:
- Decarbonisation must take place in the real world. Climate risk is a real-world problem, and we will not seek artificial ‘decarbonisation’ through changes to asset allocation decisions. Our investment-led focus is on regional and corporate transition plans which result in real-world decarbonisation that addresses the climate-change jeopardy faced by all stakeholders. Portfolio decarbonisation is not the same as investing for decarbonisation.
- Engagement around companies’ transition plans. This means using Newton’s role as an active manager to establish and manage a focused and effective engagement programme to ensure that companies’ plans are credible and achievable, not just scientifically robust. In Newton’s engagement activity, it will recognise that there are varying regional and industry pathways to net zero, and that neither the transition to net zero nor portfolio decarbonisation is linear in nature. Newton seeks to prioritise engagements with high-emitting companies as they will be the ones whose transition to net zero will be most difficult (but of most significance in achieving the net zero goal).
- Investment should be made in solution providers. There are myriad new investment opportunities aligned with delivering a successful energy transition. Newton already has investments in several solution providers linked to the transition.
