Sailing through rough seas

Last year began optimistically for Responsible Investors. More than 550 asset managers and financial institutions stepped up to fight climate change through loans and investment portfolios worth over USD130tn. But our attention was soon captivated by swelling and surging energy prices driven by Russia’s invasion of Ukraine. Even as investors began taking defensive positions in their portfolios, the case for energy sovereignty became crystal clear.

Questions regarding the value of climate and resource efficiency-oriented investment solutions seemed to answer themselves

Although some investors de-emphasised their long-term sustainability goals in a bid to capture the short-term upside of gains resulting from higher energy prices, the long-term prospects for sustainable investing remained strong. Research by Dow Jones in September 2022 showed ESG investment is expected to more than double over the next three years, while 66% of financial leaders named ESG investing as the number one driver for sustained, long-term growth. Faced with the dual challenges of our troubled economy and the undeniable need to ramp up ESG investment, we focused our attention on our core mission – delivering returns and responsibility – and let it guide us through a challenging year.

We inaugurated Climate Investing 2.0 and other innovative ESG thematics

The Global Climate Engagement strategy was launched on 26 April 2022 against the backdrop of the war in Ukraine and resulting energy independence questions. Leveraging NAM’s 15 years of expertise in climate investing, the strategy targets companies in sectors essential to the green economy yet in the early transition phase to more sustainable business models. By pushing these companies through engagement to catch up to climate leaders, our approach aims to unlock their underappreciated value and contribute to the reduction of realworld emissions.

This is what we call Climate Investing 2.0. Last year also saw the launch of our Global Social Bond Strategy and Global Social Solutions Strategy solutions addressing the “S” in ESG, and our Global Sustainable Listed Real Assets Strategy, which taps into the megatrend of greening core industries like energy, telecoms and transportation. In keeping with our commitment to RI, we continued to expand our ESG STARS family with three additional solutions bringing the ESG STARS family AUM to almost EUR17bn.

We zeroed in on engagement

Active ownership continues to be a strong focal point for us and in 2022, we initiated a concerted engagement campaign to communicate our Paris alignment expectations to the Top 200 emitters in our investment universe. The aim is to engage highemitting companies that have yet to achieve alignment objectives, but which we believe can achieve real-world emission reductions with the help of firm-wide and collaborative engagements.

Last year, we also initiated the first phase of a collaboration with selected partners and clients to engage with 15 companies in the oil and gas industry on the disclosure and mitigation of their methane emissions. The coalition of the investors involved in this engagement represents EUR 2.1tr in AUM. We will continue to drive this engagement forward in 2023.

In 2022, we conducted 994 engagements on various topics ranging from climate action to better sustainability reporting practices. At the end of the year, we considered more than 10% of these engagements to be resolved as companies met our expectations. On the voting side, we yet again achieved our goal to vote in over 95% of all votable meetings, about 3900 general meetings attended in 2022. We are also proud to share that we voted in 97% of climate proposals. Our commitment to ESG and the Sustainable Development Goals has brought recognition from across the industry. Funds Europe gave us the esteemed European ESG Manager of the Year award, one of many we received.

We’re thinking forward

Many of the issues that made 2022 a challenging year for the global economy will carry over in 2023. Moreover, with issues like climate change, biodiversity and human rights at the top of the agenda for authorities, companies unable to live up to the rising level of due diligence required will be increasingly locked out of the world’s largest markets. This poses risks for investors, which means thorough ESG analysis will continue to be imperative.

And even without these regulatory tailwinds, the power of public opinion should not be underestimated. As we are increasingly confronted with visions of extreme weather events and biodiversity loss, retail investors are likely to become more conscious of the connection between their investments and sustainability factors. As for institutional investors, while we have seen a handful of cases of backtracking in terms of climate commitments, these were overwhelmingly dwarfed by the number of entities seeking to strengthen sustainability pledges, and we have the solutions they are looking for. I invite you to read our RI Annual Report to find out more about our ongoing commitment to responsible investment.