Climate change is one of many environmental externalities that companies will have to internalise in the coming decades. One of the greatest risks, but also opportunities for companies that are prepared, is a decarbonised economy - a seemingly obvious solution to the issue of climate change. As Panvestors we seek companies who are committed to reducing their carbon footprint in a measured, practical, impactful, realistic and financially sustainable manner. To ensure we can measure and monitor our portfolio companies progress, we look to the potential financial impact of their carbon reduction efforts, through measuring their Carbon Adjusted EPS, Carbon Adjusted EPS Growth and also Carbon Adjusted PE.
OUR CLIMATE C.U.R.E.S.
Our climate-conscious investment strategy offers a clear opportunity to deliver strong outcomes for our clients, while taking into account the just transition towards a low-carbon economy. Our investment strategy that aims to achieve five broad climate goals, known as C.U.R.E.S. :
To achieve these outcomes, we have put in place climate-related investment guardrails into its investment process. These guardrails are embedded as part of our Panvesting philosophy, which focuses on all forms of capital.
EXAMPLE OF OUR INVESTMENT GUARDRAILS
100% of portfolio companies to have SBTI approved, committed or aligned targets by 2030
We shall engage 100% of portfolio companies annually on their climate actions and share global best practice
100% of portfolio companies to have S.M.A.R.T Climate/Environmental targets within 3 years of investing
At least 10% of portfolio companies will have climate action as a purpose and focus
Selection only. All our climate investment guardrails can be provided upon request.
We use proprietary assessments to identify and track credible actions that companies are taking to improve their environmental impact across their value chains. We engage companies on an ongoing basis to understand and assess their climate-related impacts, as part of our active management approach.
One such tool is our Climate Target Mapping Framework that sets out the distinct boundaries of GHG emission targets, both at portfolio level and for portfolio companies. This framework provides us with a comprehensive way to assess the broad decarbonization roadmaps of companies. We also share this analysis with our portfolio companies to help them track their ambition level and compare themselves to their peers in our portfolio.
PORTFOLIO CLIMATE METRICS
The average reduction of portfolio Scope 1 and Scope 2 GHG emissions since inception was 10.1%
Our portfolio companies' climate targets call for a 33% reduction in GHG emissions by 2030 from 2021 (from 9.0 mn tCO2e to 6.1 mn tCO2e)
The proportion of portfolio with Science-based targets (SBTi approved or committed) nearly doubled, from 34% in 2019 to 76% in 2022
Portfolio companies with S.M.A.R.T. targets in place was 92% with 71% of portfolio companies delivering on those targets
The Weighted Average Carbon Intensity (WACI) by revenue was 29.7 tCO2 per mn $ compared to MSCI world index with 132.1 tCO2e per mn $
Portfolio companies that exceeded their Science-based targets prior to 2021 achieved a 35.4% reduction in GHG emissions since 2019 (22% of portfolio)
1. S.M.A.R.T. - specific, measurable, attainable, realistic, timely
2. Data per latest sustainability report disclosed by portfolio company (31st June 2023)
Directors' Duties and Climate Change - Avoiding 'Tragedy of the Horizons'
Climate change has been identified as the ‘tragedy of the horizons’, implying that most regulators, policy makers, corporates and corporate directors don’t factor it into decisions as its impacts are beyond their personal or professional time horizon.
Founding Panvestor, Munib Madni based his Msc (Environmental Management) dissertation on the view that climate change is an issue that needs to be dealt with by corporates and their directors now, and further assumes they would have done so if they could.
It then reviews any legal reasons for the inertia behind climate change decision-making by directors, and looks for pathways for allowing them to do so.
Finally, using recent climate change litigation experiences, it considers whether success or failure of litigation is encouraging (through fear) or discouraging directors (through successful defence), respectively.