COP28 climate finance: HL updates ESG and Stewardship Policies
- Transforming climate finance is set to be a key theme at COP28. At HL we recognise our role in the net zero transition as a steward of finance and have bolstered our policies to help shift the dial.
- Our updated Stewardship and Engagement Policy focuses our three core engagement themes: climate change, community relations, and remuneration.
- We have defined our key engagement themes based on our clients’ priorities. Our Sustainable Investor Survey identified deforestation as the most important engagement topic.
- COP28 is taking place in the UAE from 30 November – 12 December 2023.
Tara Clee, ESG Analyst, Hargreaves Lansdown
“The energy sector truly holds the key to a low carbon future, considering that a staggering 91% of global carbon dioxide emissions originated from fossil fuels last year.
Yet, the upcoming COP28, hosted by one of the world’s leading oil producers, adds an intriguing dimension to the narrative, as it remains uncertain whether this influential player will be an ally or an obstacle in the ambitious agenda to phase out fossil fuels.
Carbon capture is set to be a hot topic at the conference, but there are concerns that it could be wielded as a Trojan horse by oil lobbyists. Last year witnessed over 600 fossil fuel lobbyists participating in COP, often outnumbering delegations, and projections indicate a further increase in their numbers this year.
Another focal point at this year’s COP is the transformation of climate finance. In clean energy alone, it’s estimated that more than $4trn needs to be invested every year until 2030. Not to mention the need for substantial investment in scaling up green buildings, transport, and the corresponding infrastructure.
HL is pleased to announce our latest Environmental, Social, and Governance (ESG) Investment Policy and Stewardship and Engagement Policy, demonstrating our commitment to adapting in response to global energy challenges and ensuring a just transition.
We have identified the following three mega themes to provide distinct areas of focus:
1. Climate Change: Recognising climate change as a critical ESG factor and a systemic risk to our economy, HL plc has committed to transitioning to net zero by 2050 at the latest. To qualify for our investment solutions, fund groups must either have a public net-zero pledge (covering at least scope 1 and 2 emissions) or set one within a two-year timeframe.
2. Community Relations: We expect our investee companies and fund managers to uphold responsible business practices, doing their best to sustain harmonious community relations as a core aspect of their operations.
3. Remuneration and Governance: Fair and adequate compensation is vital for long-term sustainable value creation and responsible corporate governance. HL supports responsible remuneration practices, as we recognise tying executive remuneration with company performance can ensure shareholder alignment.
Additionally, HL remains dedicated to understanding the concerns of our investors. Through client surveys conducted every two years, we gather valuable insights to drive positive outcomes in the areas that matter most to our stakeholders. In our latest Sustainable Investor Survey, deforestation emerged as a key theme, and we are actively engaging on this issue in response to our clients’ concerns.
HL remains committed to developing our responsible investment practices and contributing to a sustainable future for all.”
Note: this is the third update to HL’s ESG Investment Policy and Stewardship and Engagement Policy. These lay out requirements at the fund group, fund, and stock level for the funds that we manage and our investment solutions, including the Wealth Shortlist. As a minimum, fund groups must be a signatory of the UN PRI and have a net zero target or be working towards pledging within two years. We also have strict exclusions on controversial weapons, firms that generate more than 20% of their revenue from thermal coal or oil sands, and companies that have been in violation of the UN Global Compact for over 3 years. Exclusions are applicable to our direct equity funds and segregated mandates.
