The scientific community shows consensus on aiming to limiting global warming to 1.5 degrees from pre-industrial levels. Reaching this objective would limit the adverse effects of climate change we are to expect. However, any failure to limit such warming would result in frequent extreme weather and climate pattern changes felt across all regions of the world.

Most countries around the world have acknowledged that this challenge requires a uniform response and a common north star to spur action. While governments come together every year, at COP, businesses are also rallying to prepare for the inevitable transition. Scenario analysis (used by investors and companies to assess the potential financial impact of a fast, or slow transition) suggests that there will be big dispersions of outcomes (ranging from positive to negative) depending on how proactive a company is at planning for, and acting on, decarbonising their company and value chain.  

This underscores the need for investors like EQ to assess how companies across sectors on their climate transition path. How though to compare the quality and ambition of those consistently? It is important to qualify whether net-zero commitments are marketing or clearly embedded in science, and the company’s strategy.  

To do this, the Science-based targets initiative has been set up to develop standards, tools, and guidance which enables companies worldwide to take credible, science-based climate action. Companies’ climate targets can be submitted and verified by their panel of experts, resulting in companies publishing their “SBTI target”. 

At EQ, we pay close attention to the portfolio coverage with a verified SBTI target, as it provides a forward-looking measure to assess the preparedness of invested companies to the risks and opportunities arising through the net-zero transition. Our fund managers and own engagement help portfolios increase alignment over time.  

We are excited to share that we will integrate this measure across all our portfolio factsheet reporting, helping our clients see this transparent measure alongside current climate impact assessments like portfolio carbon footprint.