Consistent with our fund manager led approach to ESG integration, each investment team has their own process with regards to integrating ESG information into portfolio weighting, with due regard to the materiality of the risks identified and their confidence in the investment thesis. Once investments have been selected, ESG factors pertaining to each issuer inform position sizing, underpinning our views on whether our confidence in an investment decision grows or reduces over time. The input of the GS Team is available and utilised at any stage in this process, for example by undertaking pre-investment research or identifying and collaborating on areas for potential engagement to gain further insights. It is the responsibility of the fund managers to reflect material changes in ESG risk profile of companies in portfolio weightings. ESG factors are not viewed in isolation, rather the fund manager concentrates on trying to understand how these factors impact potential medium- and long-term investment performance, with reference to a company’s valuation, and identify which, in our view, are relevant and material to investment decisions.

Consistent with our fund manager led approach to ESG integration, each investment team has their own process with regards to integrating ESG information into company earnings forecasts and valuations, with due regard to the materiality of the risks identified and their confidence in the investment thesis. Once investments have been selected, ESG factors which may affect the valuation multiple and future earnings potential of companies are incorporated into the analysis, underpinning our views on whether our confidence in an investment decision grows or reduces over time. The input of the GS Team is available and utilised at any stage in this process, for example by undertaking pre-investment research or identifying and collaborating on areas for potential engagement to gain further insights. It is the responsibility of the fund managers to reflect material changes in ESG risk profile of companies into price targets and financial forecasts where these are part of the analysis. ESG factors are not viewed in isolation, rather the fund manager concentrates on trying to understand how these factors impact potential medium- and long-term investment performance, with reference to a company’s valuation, and identify which, in our view, are relevant and material to investment decisions.

Our use of climate scenarios for our investment products is at an early stage. We have focused our scenario modelling so far on three areas: 1. Global Sustainable Equity Fund: A number of published transition scenarios and associated target pathways were reviewed, including six different IEA scenarios, four IPCC scenarios, the International Renewable Energy Agency (IRENA) REmap, the Greenpeace Advanced Energy [R]evolution, and the Deep Decarbonization Pathways Project. The main focus of these scenarios is on future energy mixes. The scenarios provide limited analysis of a cross-sector approach that is needed for decarbonisation, such as the role of efficient buildings, electric vehicles, sustainable transport, efficient industrial processes and heating and cooling. 2. In our fixed income team, the consideration of demographic factors influences the allocation of government debt purchases. 3. At the stock-specific level, we have used and particularly value the methodology provided by Transition Pathway Initiative (TPI), a global, asset-owner led initiative, as a forward-looking tool to assess the preparedness of carbon intensive companies for the transition to a low carbon economy.