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RBC Emerging Markets Equity Annual Climate Report 2024
We introduce our RBC Emerging Markets Equity team’s second annual Climate report. This is designed to supplement our annual ESG report, which we have been publishing as a team since 2016.
Like last year, our aim in this report 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.
We believe that companies that invest and plan for the future and focus on a range of material 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.
RBC GAM has developed a tool for assessing, measuring and monitoring changes in our portfolio’s climate-related risks and opportunities. Using this tool and other inputs, we can provide climate-related metrics for each of the categories below:
- Carbon intensity: measuring our portfolio’s Scope 1 & 2 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 targets1 and a temperature alignment below 2oC, based on ITR2.
- Climate-related engagements: our engagements focus on understanding our companies’ approach to material climate-related risks and opportunities, and monitoring their progress in addressing these.
Given our focus on ESG integration as part of our investment philosophy and process, the strategy currently has a 79% lower weighted average carbon intensity (“WACI”) than the MSCI EM Index (based on WACI sales, Scope 1 and 2 emissions)3. The portfolio alignment is 2.1oC, based on MSCI’s Implied Temperature Rise (“ITR”)4.
Whilst we don’t seek a climate-related investment objective, through our analysis5 we believe that reaching Scope 1 & 2 portfolio net-zero by 2050 is feasible, based on the target years of our underlying holdings.
For companies in our portfolio where climate change presents a material risk, we expect them to have a short-term carbon emissions reduction target, a net-zero target year, and net-zero plan.
We will continue to engage with companies in which we are invested, and closely monitor their progress in meeting these expectations.
For the full RBC EM Equity Climate Report, please contact marketing@bluebay.com.
1 RBC GAM considers issuers’ targets to be ‘Paris-aligned’ (also called ‘science-based’) or ‘net-zero aligned’ if they have been verified by the SBTi as meeting their related target-setting criteria. SBTi provides a publicly available database of companies that have verified science-based and/or net-zero targets and those that have committed to setting an emissions reduction target within 24 months. This metric combines both verified and committed SBTi targets.
2 The ITR is a modelled, forward-looking metric by MSCI 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: ITR, MSCI® ESG Research, as at September 2021.
3,4 RBC GAM, MSCI ESG climate change metrics, MSCI®, as at 30 June 2024.
5 Analysis is based on carbon emissions and each holding’s weight and stated net-zero target year.
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