Can a passive portfolio be aligned to the two-degree reduction scenario?
UBS Asset management has developed a low carbon, rules-based investment approach, that not only reduces exposure to companies with higher GHG emissions, but also aims to align with companies that are better prepared for a low carbon future and the two-degree scenario. A key distinguishing factor of this approach is a corporate engagement program, where companies are chosen based on the lowest relative score in the Glidepath probability, that highlight their management practices and policies as well as their future carbon risks.
Once selected, we explain our investment strategy to the companies, encouraging adaptation to a 2-degree scenario. In the following 3-year engagement cycle, companies will be asked to provide information showing their progress, such as actual emission levels, strategy for reduction of emissions etc., with data being updated annually. This allows for collaborative engagement, designed to help companies make progress over time.
Another vital component of our approach is its active voting policy. This is especially important, as our strategy works with companies around the world that need to adapt their business, strategy, and corporate governance in order to reduce climate risks and meet globally agreed climate change goals.
Further, we aim to report the aggregated results of progress on an annual basis, with individual examples of company progress provided on the UBS website. We also aim to publish a report at the end of the 3-year engagement period, summarising best practices and case studies of companies that made the most progress.
Through our "climate aware" approach to investing, we at UBS Asset Management believe that we can align your fiduciary duties and sustainability objectives, and engage with companies to adapt to a 2-degree scenario and lower future carbon risk.