Aviva Investors launches climate transition engagement programme
Aviva Investors, the global asset management business of Aviva Plc, has announced its Climate Engagement Escalation Programme, which is focused on its investments in 30 ‘Systemically Important Carbon Emitters’.
The investment firm will require these companies to deliver net zero scope 3 emissions by 2050 and establish robust transition roadmaps to demonstrate their commitment to immediate action on climate change as the world’s carbon budget diminishes.
Aviva Investors considers climate change to be the greatest systemic challenge facing society, global economies, and companies. Failure to act will have catastrophic and pervasive consequences, including for capital markets and asset valuations.
The programme will run for between one and three years, depending on individual company circumstances, and incorporate clear escalation measures for non-responsive businesses or those that do not act quickly enough. Aviva Investors is committed to full divestment of targeted companies that fail to meet its climate expectations. Divestments will apply across the firm’s equity and debt exposures.
Mirza Baig, Global Head of ESG Research and Stewardship at Aviva Investors, says: “Aviva Investors’ ESG philosophy promotes the relative merits of engagement over divestment as the more effective mechanism of delivering positive change and outcomes for our clients and society. Engagement provides us the opportunity to partner with companies as they navigate the challenges of transition. However, for our engagement approach to have impact, it must be accompanied by a robust escalation process, including the ultimate sanction of divestment.”
The engagement programme includes companies from the oil and gas, metals and mining and utilities sectors that substantially contribute to total global carbon emissions. Its stipulations include the adoption of science-based targets covering the full carbon footprint of the businesses, the reframing of corporate strategies, business plans and capital frameworks, adjustments to management incentives and lobbying activities.
The responsiveness of the companies in scope will be determined by a qualitative assessment of progress against Aviva Investors’ climate engagement framework1 and quantitative improvements against the firm’s proprietary climate transition risk model.
Progress will be monitored on a six-monthly basis, at which point Aviva Investors will determine the need for escalation. This may include votes against directors, the filing of shareholder proposals, and working with aligned stakeholder groups to apply further pressure. Companies that fail to make sufficient progress at the conclusion of the programme will trigger full divestment across Aviva Investors’ equity and credit portfolios.
David Cumming, Chief Investment Officer for Equities at Aviva Investors, says: “Active investment and engagement are key to promoting company transition and solutions to the climate crisis. This approach has the complete backing of our investment teams. By fully integrating our approach across stewardship and the investment teams, we will be able to maximise our ability to influence the companies we have targeted towards positive climate strategies.”
Colin Purdie, Chief Investment Officer for Credit at Aviva Investors, says: “Creditors have an increasingly important role to play in helping to deliver climate change mitigation and transition, as well as addressing wider ESG concerns. Pockets of green finance do not go far enough. Creditors must act decisively and collaboratively to embed sustainable principles across the market, from large public companies to smaller, private high-yield issuers. Credit markets are a potentially powerful but largely untapped force that could exert significant influence on companies through the billions of dollars of debt financing they provide. Cases where creditors can act together with shareholders, as we do at Aviva Investors, can be particularly powerful.”