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Boston Trust Walden

PRI reporting framework 2020

You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe As appropriate, ESG considerations are considered in strategic asset/sector/industry allocation decisions, particularly with respect to portfolio holdings and weightings.
Describe As appropriate, climate-related risks and opportunities are considered in strategic asset/sector/industry allocation decisions, particularly with respect to portfolio holdings and weightings.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

As appropriate, ESG considerations are considered in strategic asset/sector/industry allocation decisions, particularly with respect to portfolio holdings and weightings. For example, we consider the impact of climate change on industries comprising the energy sector as part of our sector and industry allocation decisions. As the Task Force on Climate-related Financial Disclosures (TCFD) framework makes clear, however, climate risk is not limited to energy companies and utilities. We have long considered the supply side of climate risk (fossil fuel companies and utilities), as well as the demand side (all other companies). The impact on demand side companies is more challenging to discern and is further influenced by the range of potential responses to climate change. The current state of disclosure from companies makes it especially challenging for investors to systematically consider risks, underscoring the importance of the TCFD framework.

Other examples of ESG considerations include how performance on financial inclusion and fair lending practices may affect the long-term outlook of the banking industry, and how consumer preferences for healthy food influences fast food restaurants and food and beverage companies.


SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

Please see our TCFD report, specifically our response to "Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2-degree C or lower scenario. Describe how each product or investment strategy might be affected by the transition to a lower-carbon economy" on our website under Impact Investing Resources at https://www.bostontrustwalden.com/investment-services/impact-investing/resources/.

Describe

The changing climate is the world’s foremost environmental challenge with far-reaching economic, environmental, and social implications that create risks and opportunities for companies and investors. As investors who hold shares of publicly traded companies, we believe we have a unique ability and responsibility to influence corporate leadership to embrace its role in identifying and advancing solutions.

While we cannot anticipate the global pathway to a low carbon economy, we know we want to use our investment influence and resources to advance a low carbon future. As such, a multiple scenario approach is unnecessary. 

We utilize active ownership strategies to encourage companies to aggressively pursue a path toward a carbon-neutral future by asking them to:

  • set greenhouse gas (GHG) emissions reduction targets based on widely-accepted scientific research.
  • advocate for and support effective climate policy with lawmakers at the local, state, national, and international levels.

As companies set science-based targets, they signal to lawmakers that addressing climate risk makes good business sense, enabling legislators and regulators to develop sound public policy solutions that, in turn, provide companies effective frameworks to support climate-related goals.

Our active ownership efforts on climate risk span decades. In 1990, we filed our first climate-related shareholder resolution, asking the company to commit to the Valdez Principles, one of the first corporate environmental codes of conduct. In 1998, we filed a resolution asking an insurance company to review the potential effects of climate change on its business and financial outlook.

Today, we work independently and in partnership with others to move toward a carbon-neutral future. Results of these efforts, including direct company engagement, collaborative initiatives, and public policy activities, are disclosed in our Annual ESG Impact Report 2019 available at https://www.bostontrustwalden.com/wp-content/uploads/2020/02/2019-ESG-Impact-Report_Digital-PDF.pdf.

Our proxy voting record supports our engagement efforts. In 2019, we voted for all shareholder proposals that asked companies to set GHG emission reduction targets and improve climate risk disclosure. 

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Describe

As investment managers on behalf of asset owners who often have indefinite time horizons, we keep informed by the work of the IPCC, among others, in considering climate risk.

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          IPCC and others
        
Other
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

other description (1)

          Increasing U.S. and global income and wealth inequality.
        

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

Boston Trust Walden integrates climate change risk in portfolio management in a holistic manner – addressing the supply side (fossil fuel and related companies when held) as well as the demand side (all other portfolio companies as energy users). We consider several indicators of corporate performance on climate change when making investment decisions, including greenhouse gas reduction initiatives, energy efficiency and natural resource conservation, commitment to renewable fuel sources, and public policy positions. This investment approach results in portfolios that have favorable carbon footprints relative to comparable benchmarks.

We also use our influence as investors to engage companies strategically on the development and implementation of robust climate strategies, including minimization of risk and identification of opportunities. We track substantive climate-related engagements and public policy efforts and disclose results, including improvements in climate policies, practices, and/or disclosures, in our Annual ESG Impact Report 2019 available at https://www.bostontrustwalden.com/wp-content/uploads/2020/02/2019-ESG-Impact-Report_Digital-PDF.pdf.

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

In 2019, for the sixth consecutive year, we published carbon footprint metrics for our strategies. In 2019, based on TCFD recommendations, we reported emissions normalized by revenue, in place of market capitalization. Using the weighted average intensity metric, our portfolios were 46 to 74% percent less carbon intensive than their respective benchmarks (see our full TCFD report and carbon portfolio footprint for details: https://www.bostontrustwalden.com/investment-services/impact-investing/resources/).

The shortcomings of footprinting methodologies are well established. For example, most approaches do not include value chain emissions (Scope 3), which usually dwarf emissions from direct operations. The footprint also gives no indication of industry dynamics in scenarios that incorporate a price on carbon, which may help predict winners and losers. Furthermore, the underlying data do not reflect commitments companies may have made to reduce their carbon footprints going forward, or whether a company's products have a positive or negative impact from a climate perspective.

To address this final concern, we expanded our analysis to track companies in our large cap core strategy with emissions reduction targets, a potentially useful forward-looking indicator. Forty seven of sixty five companies in the portfolio as of December 31, 2019 had either absolute or intensity-based greenhouse gas reduction goals. Eighteen companies currently have science-based emission reduction targets and an additional twelve companies plan to set science-based targets soon. Most recent data available as of this writing.

We also continue to include the weighted average carbon intensity metric in our standard “Portfolio Characteristics” table. This table is used internally and externally to help clients and others understand how our portfolios compare to their respective benchmarks on a range of financial metrics.

 

 

14.5. Additional information [Optional]


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Weighted average carbon intensity
          To assess our relative carbon intensity across equity strategies.
        
          Tons of carbons emissions per million dollars of revenue, per the portfolio.
        
          See our Annual Carbon Footprint Report for details on our methodology and the results (for 2019): https://www.bostontrustwalden.com/investment-services/impact-investing/resources/.
        
Portfolio carbon footprint
          To assess our relative carbon intensity across equity strategies.
        
          Tons of carbons emissions normalized by market capitalization.
        
          Current and prior year reports available at https://www.bostontrustwalden.com/investment-services/impact-investing/resources/.
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

Please see our TCFD report at https://www.bostontrustwalden.com/investment-services/impact-investing/resources/.

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

Please see our Annual ESG Impact Report 2019 and our TCFD report at https://www.bostontrustwalden.com/investment-services/impact-investing/resources/.


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

8 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

          Fossil Fuel Free
        

Asset class invested

8 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

For all client portfolios, Boston Trust Walden integrates climate change risk in portfolio management in a holistic manner – addressing the supply side (fossil fuel companies) as well as the demand side (all other portfolio companies as energy users). We consider climate change risk in company selection, shareholder engagement activities, and public policy advocacy.

For clients who have determined that they will exclude investment in fossil fuel companies altogether, we have over twenty years’ experience managing portfolios with no direct exposure to coal, natural gas, and oil companies.

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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