Head of Responsible Investing
Net zero in focus
At Premier Miton we are working hard moving into 2023 on our Net Zero carbon emissions strategy. Net zero is important as it’s the best way we can tackle climate change by reducing global warming. What we do in the next decade to limit emissions will be critical to the future, which is why every country, sector, industry and each one of us must work together to find ways to cut the carbon we produce.
As we review our business wide activities, we’ve looked back on the big moves in the responsible investing space to give our work a point of reference. 2022 does not paint a pretty picture I’m afraid, we could highlight the images of the uninspiring talking shop that was COP27 (the 27th UN convened global climate change conference), a not very green UK budget, and a not at all green FIFA World Cup. There was an encouraging end to the year however with the potentially transformational biodiversity COP15 conference.
COP events can feel like London buses
We had to wait two years between COP25 and COP26, which was held in Glasgow in November 2021. Then 12 months later two more arrived: COP15 and COP27. COP15 is shorthand for the 15th meeting of the Conference of the Parties to the UN Convention on Biological Diversity, a two-week summit that took place in Montreal, Canada, during December 2022. It was the biggest biodiversity conference in a decade and countries struck a historic deal on protecting and restoring nature.
Biodiversity is vital to life on our planet. It is essentially the life support system for humanity. From our oceans to our forests, nature underpins the world’s food system; provides fresh water; sustains the quality of the air and soils; regulates the climate; provides pollination and pest control; absorbs carbon emissions and reduces the impact of natural hazards. But harm too many of these ecosystems and we risk endangering their ability to provide basic life support services.
Taking an active interest
Looking back at 2022, we can be proud of our level of active company engagement on climate risk. This was both through collaborative action groups such as CA100+, the CDP non-disclosure campaign and the Investor Forum as well as directly with individual companies we both invest in or are considering investing in.
CA100+ stands for Climate Action 100+, an investor-led initiative to ensure the world’s largest corporate carbon emitters take necessary action on climate change. The CDP (Carbon Disclosure Programme) disclosure campaign offers investors the opportunity to actively engage companies to drive further corporate transparency around climate change. The Investor Forum was set up by institutional investors focussed on investment in UK companies. The Forum’s purpose is to position stewardship at the heart of investment decision-making by facilitating dialogue and looking to create long-term solutions.
Our work with CA100+ focusses on two North American oil and gas pipeline companies that we invest in within the Premier Miton Global Infrastructure Income fund. Through our collective engagement we saw progress on more low carbon aligned allocation of capital. For example, one of the pipeline companies, Enbridge, acquired a company that develops renewable energy projects.
The CDP disclosure campaign provides a proven mechanism for increasing the rates of company disclosure and hence improving the quality of investors response to tackling the climate crisis. We had success in 2022 encouraging some of the companies we invest in to complete their CDP climate assessments, with six of the companies held in the Premier Miton Responsible UK Equity Fund reporting for the first time. As well as improving climate risk management across the companies we invest in, this reporting flows through to improving carbon reporting metrics at the fund level.
Progress through the Investor Forum
Through the Investor Forum, we benefitted from collaborative engagement on specific issues with several companies that we invest in across the range of Premier Miton funds. Additionally, we saw company Chairs and Chief Executive Officers presenting their plans to tackle climate change in their businesses to the forum and responding to investors’ questions.
Instigating positive change company by company
When we meet with companies, we are increasingly asking about their carbon reduction strategy as well as pushing for them to allocate capital expenditure in low carbon sectors and products. One highlight of new low carbon projects was a visit to Cruachan in Scotland, the site of a new pumped storage hydro plant owned by Drax Group PLC. Drax is a power generation business and our discussions with companies like Drax reinforce that investors require clear actions as well as highlighting the barriers that companies face.
One key barrier is a lack of clarity on how the government’s net zero strategy will be delivered, as outlined by the UK’s Committee on Climate Change. A positive shift though are the plans to remove the ban on UK onshore wind turbines, currently a source of the cheapest per Mega Watt Hour (MWH) electricity available in the UK.
United Kingdom’s Levelised cost of energy (LCOE) range per technology type
Source: Bloomberg data from H1 2014 to H2 2022
And closer to home
Finally, Premier Miton Group PLC published its first climate related disclosures in its annual report and joined the Net Zero Asset Managers Initiative in November 2022. We were pleased that the Carbon Disclosure Programme (CDP) recognised our improved climate disclosures and awarded us a B in their annual assessment. Companies that score a B have addressed the environmental impacts of their business and ensure good environmental management. A B-score indicates that a company is showing some evidence of managing its environmental impact.
The world we want to see in 2023 (and beyond)
In 2023, we will be focusing our support on the work required by the Net Zero Asset Managers initiative by concentrating our efforts on companies in high carbon sectors. We want to achieve carbon reduction across these holdings over time, for example through supporting the development of a net carbon zero transition plan.
Across our multi manager funds, we have already requested that our third-party fund managers complete a supplementary climate Q&A in addition to our existing ESG questionnaire. This will allow us to assess the potential climate risk in these portfolios.
During 2023 we will consider the ground-breaking progress of COP15 as biodiversity and climate risks are inextricably linked. We will continue to work with The Wildlife Trust, supporting their work to protect and enhance the biodiversity across their 2,000 UK nature reserves and supporting their call for 30% of the UK’s land and sea to be protected by 2030.