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.
We expect environmental capital to be respected by our portfolio companies with appropriate commitments
We see carbon cost becoming an increasingly important component of a company's financials and intrinsic value
We expect our portfolio to reduce its net emissions in absolute terms
We engage with portfolio companies to understand their environmental issues, long term commitments, SMART targets and transition pathways
PORTFOLIO CLIMATE METRICS
95% of portfolio holdings have S.M.A.R.T* long-term targets on absolute carbon emissions reduction
62% of portfolio holdings participate in the EU Emissions Trading Scheme (ETS) where carbon is traded as a commodity
62% of portfolio holdings have adopted Science-based Target Initiative (SBTi) for their carbon emissions reduction targets, in line with the Paris Climate Agreement
Portfolio’s absolute carbon emissions reduced by 46% (scope 1 and 2) from baseline year*
Total carbon emissions of portfolio reduced by 11.2% YoY in 2019 compared to 2018
Our portfolio has a weighted average 2019 EPS growth of 11% vs their Carbon Adjusted EPS growth of 13.2%. This highlights that our portfolio companies are reducing their carbon emission and costs at a financially significant rate.
1. A specific, measurable, attainable, realistic, timely
2. Baseline year as indicated by individual holding in their CDP disclosures
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.