Boston Common’s Climate Action Plan

By Lauren Compere, Managing Director, Head of Stewardship & Engagement

The Amazon is now emitting more carbon dioxide than it can absorb. According to the 2021 IPCC report, immediate, rapid, and large-scale action is necessary to ensure emissions peak by 2025 and warming is limited to 1.5°C. Ending deforestation and investing in natural climate solutions could account for up to 1/3rd of what’s needed to meet the Paris climate target while simultaneously supporting global goals to halt and reverse biodiversity loss by 2030. Since inception, Boston Common has prioritized investment in key climate-change mitigation strategies. As we celebrate Earth Day 2022, our intention is to act boldly, innovate broadly, and implement equitably.

Biodiversity loss and ecological destruction caused by deforestation is a systemic risk critical to our integrated climate strategy. In 2022, we are collaborating with investors across the globe in supporting robust public policy engagement that advocates for strong corporate climate disclosure, ensuring our issuers’ business strategies are Paris-aligned, and escalating active ownership through proxy voting and climate-related shareholder proposal filings. Consistent with this strategy, Boston Common made three significant firm-level commitments in 2021 to align our investing, stewardship, and engagement approach with a 2050 Net Zero and 1.5°C pathway:

These commitments help guide our firm’s goals of climate and sustainability leadership – creating impact through stewardship and engagement, avoiding investment in egregious corporate players, and investing in solutions.

Our Commitments in Practice: Net Zero

As part of our commitment under the Net Zero Asset Managers (NZAM) initiative, earlier this year we completed a firm-level baseline assessment of our financed emissions (Scope 1 & 2), set an objective to further align portfolio emissions with 2050 Net Zero and 1.5°C targets, and adopted an Investor Climate Action Plan (ICAP) supporting integration across investing, stewardship, and engagement activities.

Our December 2021 baseline assessment on absolute GHG emissions and relative carbon intensity[1] exceed the IPCC recommendations, putting us in a position to realize most of the required reductions by 2030. Our firm’s total financed emissions (Scope 1 & 2) equal 153,197 tons, nearly 68% less than the MSCI ACWI benchmark (“the benchmark”) total of 471,956. All assets under management included in the baseline assessment is aligned with 1.6°C through 2048 as outlined by the IEA Sustainable Development Scenario (SDS) versus a 2.9°C trajectory for the benchmark.[2] Our analysis further reflects that 67% of our holdings have a climate commitment or target while 18% of our holdings have no target. The remaining 13% have defined targets which are not currently aligned with a 2050 net-zero pathway.[3]

An expectation of the NZAM commitment is to engage key holdings and improve portfolio financed emissions over time. Over the current engagement cycle (2021-2024), we will prioritize portfolio companies across strategies that have not established targets and may also engage those with insufficient targets that are not aligned with a 1.5°C by 2050 trajectory. At the portfolio strategy level, we will prioritize engagement with top carbon emitters in portfolios not currently aligned with 1.5°C.

In order to achieve the most impact, we will begin engaging the 10 highest absolute GHG emitters at the firm level, which represent close to 60% of our overall financed emissions (Scope 3). In 2021, a number of these holdings were engaged under our High Emitters Engagement Initiative, a data driven and full value chain framework focusing on:

  • Governance of Sustainability
  • Climate Risk Assessment and Transition Pans
  • Interim Targets and Metrics (2025 or 2030)
  • Energy Mix, Supplier Engagement
  • Climate and Paris-Aligned Political Participation & Lobbying

Our 2022 engagement priorities go beyond engaging highest emitters to ensuring financial holdings are Paris-aligned in their own financing and investments. This adds on to our longstanding leadership in engaging the banking sector, not to mention our efforts to address the “S” in the Green Recovery, ensuring the renewable energy sector supports a just and sustainable transition throughout production and sourcing.

Our Investor Climate Action Plan builds on our robust climate-related public policy engagement, a full-value-chain approach with key financial players filing and supporting climate-related shareholder proposals (Citigroup, TJX), and escalating proxy voting policies where we may vote against directors who fail to adequately address climate-related risks, realize climate-related opportunities, and improve climate-related performance.

We urge all financial players including investors, banks, insurance companies, financial regulators, and governments to be courageous. Integrating existing climate action with an earth systems approach will mitigate biodiversity loss & ecological destruction from deforestation as well as the disproportionate impacts to vulnerable populations such as indigenous peoples and communities of color. Time is of the essence. Let’s do our part by acting boldly, innovating broadly, and implementing equitably.

[1] Encompasses 93% of AUM; A portfolio’s Carbon Intensity is achieved by calculating the carbon intensity (Scope 1 + 2 Emissions / $M Sales) for each portfolio company and calculating the weighted average by portfolio weight.

[2] As of 12/31/2021

[3] 35% of which are approved Science Based Targets; 32% of which are either committed Science Based Targets or considered an ambitious target

Published On: April 5, 2022Categories: Thought Leadership