Climate change statement

Our investment philosophy and Hippocratic Oath are the primary means by which we ensure our investments are well aligned with climate and other sustainability objectives. Our long-term focus on quality companies that are well positioned to contribute to, and benefit from, sustainable development is not an add-on or side project, it sits at the heart of every investment decision we make.

Supported by our management team and senior investors, each member of our investment team is accountable for ensuring we execute our stewardship responsibilities in line with our philosophy. Our management team ensures that the investment team has the support it needs to deliver on our objectives.

Stewart Investors also participates in and is subject to the governance arrangements of the wider First Sentier Investors (FSI) group, which it is part of. Stewart Investors staff sit on FSI’s Global Responsible Investment Steering Group and ESG Impacts Committee. Stewart Investors’ investment strategies are overseen by FSI’s global investment committee, risk assurance and internal audit functions.

Remuneration for all investment team members is linked to the long-term performance of our investment strategies and our business. We do not believe separate incentives for sustainability are necessary, or effective, in the context of our organisation and its deep commitment to sustainable investment.

We are committed to achieving global sustainable development objectives, including the well below 2oC warming target of the Paris Agreement. We believe that we have been playing a positive role in pursuing sustainable development objectives for many years, and are focused on increasing and improving our contribution.

In keeping with this commitment, we have become a signatory of the Net Zero Asset Managers initiative. Being a signatory to the initiative involves a number of commitments from setting emissions targets to working collaboratively with clients and other stakeholders. 

Consistent with the Net Zero Asset Manager initiative we have set a target of reducing financed emissions by 50% by 2030, using a 2019 base year. We have also set a target of achieving net-zero emissions by 2050. We will review these targets at least every five years with a view to setting targets that are more ambitious. As data improves, we will incorporate scope 3 emissions into our targets.

View our Climate Report for full details on our targets and commitments.

Prior to committing to the Net Zero Asset Managers initiative we went through a process to identify and better understand how we can set credible and implementable targets which are aligned with our investment philosophy and process. Historically we have not used targets for any of the issues we find important (you can read more on this at Our approach to sustainable investing).

Our broad understanding of sustainable development is best represented by the Global Footprint Network’s chart which compares human development on the X-axis and ecological footprint on the Y-axis.

The implied goal is to move towards the bottom right-hand corner of the chart where human development is high and ecological footprint is low. Historically, we have not set targets for goals like health and wellbeing, living wages, pollution or biodiversity, rather we focus on the quality, stewardship and sustainable development contributions being made by individual companies. Our carbon targets do not change or diminish our concerns for these issues, instead we see them as being completely aligned. We will consider the role other targets can play in our investing as our approach to meeting our current targets evolves.

Nor do our targets diminish our concern that society will need to do more than many of the net zero pathways outlined today suggest. Top-down models of the economy and its emissions bear little relationship to our portfolios which are largely fossil fuel free. Such modelling may suggest our portfolios have already arrived at the 1.5oC world, but we know this is not the case. We worry about commitments being made that are reliant on negative-emissions technologies and an abundance of carbon sinks5 in the future. 

It for this reason we have found Project Drawdown’s climate solutions helpful, as they encompass social, economic and technological changes needed across food, energy, transportation and industry. We will continue to support a lower-carbon future in the global economy by investing in relevant and proven solutions.

For many years we have been commissioning independent investment research on sustainability themes and issues which support our investment decisions. This research spans diverse topics from political lobbying in health care to the lead content in paints. In terms of climate change, we have commissioned research on subjects including sustainable palm oil, alternatives to palm oil, sustainable sourcing of soy, the ecosystem impacts of consumer products, fossil fuel-dependent capital goods, and the loan-book assessment of Asian banks.

Where contractual requirements allow it, we share this research with clients and use it as an important engagement tool with the companies we are invested in. Wherever possible we ask the external providers to publish the research.

We have a history of supporting various industry initiatives (and other initiatives) aimed at improving investor understanding and adoption of sustainable investment practices. For example, we were amongst the first investors to commission carbon-accounting7 research in the Asia Pacific (through Trucost); we were founding members of the Association for Sustainable & Responsible Investment in Asia (ASrIA) and are a signatory to the Carbon Disclosure Project (CDP).

For climate change specifically, we are currently signatories to the CDP and have led, and participated in, the Principles for Responsible Investment (PRI) initiatives, including collaborative engagements on deforestation and plastics.

We are also active members and contributors to other related industry forums including the UK Sustainable Investment and Finance Association (UKSIF), the Responsible Investment Association of Australasia (RIAA) and the Intentional Endowments Network in the US (IEN).

Consistent with our position statement on harmful and controversial products and services, we do not have any direct fossil fuel investments. There are many transition risks for these companies that conflict with our objective of investing only in companies contributing to a more sustainable future and our belief that capital preservation is important for capital growth.

There may be rare cases, particularly for utilities, where a company has the ability and willingness to transition successfully and profitably. In such cases, we would need to be convinced that the transition plan can be achieved rapidly and credibly. Should this occur we will fully disclose any such investment and the reasons for it. 

We will report annually on our progress against our climate change objectives. We will model this reporting on TCFD8 to the degree it is relevant to us and we will support our clients in meeting their reporting requirements.

The TCFD is primarily focused on the risk of climate change to the reporting organisation, rather than the effect the reporting organisation has on the climate or its role in driving solutions. Both perspectives are important and we intend to cover both in our reporting.

The TCFD also includes recommendations on scenario analysis. We don’t believe top-down scenarios are relevant or effective for understanding the climate change related risks and opportunities of our investments at portfolio level, however we regularly consider different scenarios at a company level. We will incorporate climate related risks and opportunities in our company level disclosures.

The TCFD is also a useful model for the companies we invest in to use for their reporting. However, we do not see it as a ‘tick the box’ exercise and are more interested in seeing an integrated approach to reporting which covers all relevant issues as part of the company’s strategy. We will encourage companies to refer to TCFD where we believe their climate change reporting needs to be improved. 

Engaging with companies and proxy voting are core parts of our investment process. In the same way our investment process seeks out quality companies that are well positioned for sustainable development, our engagement and voting revolves around understanding and encouraging improvements in those areas.

One of the expected outcomes from our action plan is increasing ambition and falling emissions from the companies we invest in. We will use engagement to support our companies in the climate challenge. In our Climate Report we provide analysis of company emissions and targets, and will use that information to encourage companies to improve.

We will purchase offsets for our direct operations. Purchasing carbon offsets9 helps us to incorporate a cost of carbon into our business while supporting the transition to a carbon constrained economy, particularly for those people and communities most vulnerable to climate change.

We do not count these offsets towards our carbon calculations and pay for them as a business expense. We will only purchase high quality offsets, such as those certified by the Gold Standard or Plan Vivo10.