Sustainable investing practice of the Omnis funds
Pirelli & C S.p.A is an Italy-based producer of tyres for the automotive industry. The manager’s ESG engagement with the firm aimed to better understand the ecological impacts of its products and help shape disclosure going forwards. The goal was to encourage the company to improve disclosure on microplastics – a by-product from the wear of its tyres, which when left unchecked, can cause serious damage to public health and natural ecosystems.
Management was actively involved in the engagement process. The data shared demonstrated an increased investment into the sustainability of its products, and improvements in the wear rate of their products by 30% compared to previous generations. They have also had proactive dialogue with the wider tyre industry to increase awareness and measurability of this topic.
From here the Barings team will continue to engage to understand what the company is doing to address the impact its products have on ecological systems, and in doing so they will seek to improve public disclosure.
Over 2022, Barings conducted 35 ESG engagements on Europe Ex-UK companies; 29 were closed successfully and six are still ongoing. 71% of those engagements were aimed at changing the behaviour of the company and 29% were aimed at improving ESG disclosures.
Newton has been actively engaging with companies. Below are two recent examples.
Newton has been engaging with Goldman Sachs (GS) for almost three years to encourage the bank to solidify its net-zero approach and set interim emissions targets. They have consistently conveyed to the bank the need to commit to a net-zero target and to see the 2030 interim targets reflect the ‘1.5 degrees of warming’ scenario.
The bank has improved its reporting and disclosures on financed emissions (emissions that originate from a financial institution's assets and investments), and in 2022 it set intensity-based targets for the financed emissions for its oil and gas, power, and auto manufacturing sectors. Newton believes the bank took these steps as a response to shareholder engagement, which they were part of.
In September 2022, Newton discussed in detail Goldman Sachs’ climate transition plan with its sustainability team. Newton will continue to follow up with the bank to understand its client engagement methodology in greater detail, and to seek firmer commitment to exit the coal funding marketplace.
Newton voted against the continued appointment of the incumbent Public Policy and Sustainability Committee Chair of ConocoPhilips, Alaska’s largest crude oil producer. This was due to the company’s limited responsiveness to the majority-backed shareholder proposal at its 2022 AGM, notably on disclosing certain carbon emission targets. Further, they supported a number of other proposals aimed at setting targets and improving emissions.
Newton believes this voting action sends a clear signal to the company on the need to take into account these externalities and shareholders' views on them. Newton also supported a shareholder proposal requesting a report on the company’s policies and procedures governing both direct and indirect lobbying activities. The company, though disclosing at a good level, lacks some disclosure around indirect lobbying that would benefit shareholders.
Fidelity has proactively engaged with GrupoMexico, a Mexico-based conglomerate that operates in Mining, Transportation, and Infrastructure. The Fidelity team focused the meeting on environmental controversies (specifically on a water pollution incident in its Mexico operations). They also covered social and governance topics.
Water pollution controversy – their systems and controls have been comprehensively overhauled and satisfactory steps have been taken to ensure the incident will not be repeated.
Water management – the firm is implementing water capture projects and is investing in technology to reduce their water use, especially in their tailing dams.
Biodiversity – they have committed to net positive impact, including zero net deforestation. They are implementing systems to measure their impact and progress.
Community relations, labour management and governance of sustainability topics were also discussed.
The company is now part of two sustainable indices (thereby classified as ‘sustainable’ by independent third parties). They also published their sustainability report that includes new greenhouse gas reduction targets and a net zero ambition in May 2023.
CTI has had an ongoing engagement with Tesco, a UK-based groceries and general merchandise retailer, on a range of sustainability issues. Earlier in 2022 they identified Tesco as having relatively weak disclosure on the ‘Nature’ sustainability theme, relative to its risk exposure on the theme.
In December 2022, CTI met with Tesco’s Head of Environment and Sustainable Agriculture to discuss Tesco’s strategy for its Nature theme.
CTI’s team was reassured as to the depth of Tesco’s approach to Nature in operations and in its supply chain, including the innovative supplier mapping work with World Wildlife Fund (WWF). Traceability remains a challenge, particularly for key commodities such as soy. The CTI team will continue to monitor progress on this at Tesco and across the sector.
During 2022, Fulcrum have had the following voting statistics:
Voted 315 times against pay for misaligned environmental and/or social incentives.
Supported 86% of key environmental and social shareholder proposals.
Voted 751 times against directors for environment-related reasons, including insufficient climate disclosure and targets.
Supported 100% of key proposals related to human rights.
Fulcrum targets specific themes within the strategy, which are designed to take advantage of sustainability-related tailwinds in their long holdings or positioned to benefit from headwinds in the short exposures.
Such themes include clean energy, waste and recycling, rail transportation (a more energy efficient form of transportation), and salmon farming (with a smaller carbon footprint than other animal-based protein sources).
