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RBC Emerging Markets Equity Annual Climate Report 2023
This is the RBC Emerging Markets Equity team’s inaugural Climate report which is designed to supplement our annual ESG report, which we have been publishing as a team since 2016.
In this report, our aim is to provide stakeholders with information on exposure to climate-related risks and opportunities within the RBC Emerging Markets Equity Strategy (“the strategy”) and detail our engagement activities within this area. Ultimately, our view is that companies that invest and plan for the future and focus on a range of ESG factors, including climate change, have more durable business practices and are therefore more likely to achieve resilient, long-term returns while also avoiding the risks.
We recognise the importance of the principles of the Paris Agreement1 (often referred to as the ‘Paris Accord’ or the ‘Paris Climate Accord’), and the international goal of limiting the global temperature rise to well below 2°C and preferably no more than 1.5°C by the end of the century, in order to mitigate climate risk. We are also encouraged by a recent global agreement – the Glasgow Climate Pact – which was reached at the United Nations Climate Change Conference (“COP 26”) in November 2021. This agreement will set the global agenda on climate change for the next decade.
We acknowledge the need to achieve a just and orderly transition to net-zero that promotes widely shared economic prosperity. As part of this commitment, we have made measuring and monitoring the climate-related risks and opportunities of the strategy a key focus of our ESG research.
RBC Global Asset Management has developed a number of climate data tools for
measuring and monitoring changes in our portfolio’s climate-related risks and opportunities. Using these tools and other inputs, we can provide climate-related metrics for each of the categories below:
- Carbon intensity: measuring our portfolio’s carbon intensity relative to the benchmark.
- Net-zero alignment: this is based on two metrics – the percentage of AUM invested in issuers with net-zero or science-based targets and a temperature alignment below 2oC, based on ITR2.
- Climate-related engagements: our engagement strategy focuses on understanding our companies’ approach to climate change and monitoring their progress. We provide further details in this report.
Given our strong focus on ESG integration as part of our investment philosophy and process, the strategy already has strong climate-related credentials which we detail in this report. It is our intention to ensure that all the companies in our portfolio, where climate presents a material risk, have a short-term carbon reduction target, net-zero target year, and net-zero plan.
We will continue to engage with our companies and closely monitor their progress.
For the full RBC EM Equity Climate Report, please contact marketing@bluebay.com.
1 The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 parties at the UN Climate Change Conference (“COP21”) in Paris, France on 12 December 2015. It entered into force on 4 November 2016.
2 The Implied Temperature Rise (“ITR”) is a modelled, forward-looking metric that indicates what the global average temperature increase would be in 2100 if the global economy had the same carbon performance and emissions reduction targets as that of the issuer or portfolio. Source: Implied Temperature Rise Methodology, MSCI® ESG Research, as at September 2021.
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