Collaborating with an auto manufacturer for a science-based emissions target
We started engaging with a Japanese multinational automotive manufacturer regarding their climate strategy in 2018. Over time, the conversation progressed, and we encouraged the issuer to make a clear commitment to net zero and define a pathway to achieve that goal. We considered this important for investors to understand the company’s role in a lower-carbon world.
We engaged with the company over a number of years to discuss climate strategy, generally, and the issuer came to see us as a valuable resource as they developed their climate strategy. Through these conversations, we raised the need for clarity on their pathway to reduce emissions over time both in their operations (scope 1 and scope 2 emissions) and through consumer use of their products (scope 3 emissions).
1 Scope 1 is considered direct GHG emissions from sources that are owned by the entity. Scope 2 is considered indirect and made up of emissions coming from purchased electricity, steam, heat, and cooling. Scope 3 emissions are indirect emissions not included in scope 2 and categorized into upstream and downstream activities. Upstream activities include purchased goods and services, capital goods, and waste generated from operations, while downstream emissions include the use of sold products, end-of-life treatment of sold products, and other defined classes of indirect emissions.
In September of 2022, the Science Based Targets initiative (SBTi) validated scope 1 and scope 2 targets for the issuer seeking to reduce emissions 68% from 2019 levels by 2035 and to reduce emissions intensity from passenger light-duty vehicles 33% by 2030 from 2019 levels. These new, objectively validated, targets put the company on a pathway aligned with the goals of the Paris Accords.
The case studies shown here are for illustrative purposes only; do not represent all of the investments made, sold, or recommended for client accounts; and should not be considered an indication of the ESG integration, performance, or characteristics of any current or future Manulife Investment Management product or investment strategy.
Manulife Investment Management conducts hundreds of ESG engagements each year but does not engage on all issues or with all issuers in our portfolios. We also frequently conduct collaborative engagements in which we do not set the terms of engagement but lend our support in order to achieve a desired outcome. Where we own and operate physical assets, we seek to weave sustainability into our operational strategies and execution. The case studies shown are a sampling across issues and geographies. Our approach to ESG investing and incorporation of ESG principles into the investment process differs by investment strategy and investment team. It should not be assumed that an investment in the company discussed was or will be profitable. Actual investments will vary, and there is no guarantee that a particular fund or client account will hold the investments or reflect the characteristics identified. Please see our ESG policies for details.
We consider that the integration of sustainability risks in the decision-making process is an important element in determining long-term performance outcomes and is an effective risk mitigation technique. Our approach to sustainability provides a flexible framework that supports implementation across different asset classes and investment teams. While we believe that sustainable investing will lead to better long-term investment outcomes, there is no guarantee that sustainable investing will ensure better returns in the longer term. In particular, by limiting the range of investable assets through the exclusionary framework, positive screening, and thematic investment, we may forego the opportunity to invest in an investment that we otherwise believe likely to outperform over time.
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