Abrdn warns it will divest in climate drive

Stephen Bird

Edinburgh-based investment giant Abrdn has announced a target to reduce the carbon intensity of its assets by 50% by 2030 versus a 2019 baseline.

Abrdn — which oversees £532 billion of assets — made the announcement on Finance Day of COP26.

Abrdn said it will divest from companies where, after two years, “it considers insufficient progress has been made against the transition milestones set, unless it’s not in line with the client mandate.”

It said it will track and reduce the carbon intensity of its portfolios.

And Abrdn called for “effective incentives in the form of appropriate carbon pricing” in order “to enable capital allocation in line with net zero and to create an investment environment which rewards companies and investors that go green.”

The asset manager said: “Abrdn has developed a climate change strategy focused on Net Zero Directed Investing (NZDI).

“This means moving towards the goal of net zero in the real world — not just in its portfolios.

“Abrdn will seek to achieve this goal through a set of actions, including rigorous research into net-zero trajectories, developing net-zero-directed investment solutions and active ownership to influence corporates and policy makers.”

Abrdn said the goal will be delivered via three pillars of action: decarbonisation, providing net zero solutions, and “active ownership.”

On decarbonisation, Abrdn said is committed to tracking and reducing the carbon intensity of its portfolios.

“That means continuing to incorporate carbon analysis into the investment process and supporting credible transition leaders and climate solutions,” the firm said.

“Our equities, credit and quants investments already have the majority of assets with a carbon intensity below benchmark and our real estate business has committed to aligning their assets to net zero 2050 pathways.”

On providing net zero solutions, Abrdn said it is committed to increasing the proportion of assets flowing into net zero directed investing solutions.

“Around 30% of AUM is currently managed in line with net zero 2050. Abrdn will aim to increase this by continuing to develop net zero solutions across all asset classes, actively engaging with clients as well as transitioning its fund range to support net zero goals,” said the company.

On active ownership, Abrdn said it is committed “to voting and engaging with its investee companies to drive change and transition real assets.”

The firm said: “The team will engage with the highest financed emitters across equity and credit holdings seeking transparency on progress against clear transition milestones assessed against relevant standards – such as the Climate Action 100+ net zero benchmark.

“Abrdn will divest from companies where, after two years, it considers insufficient progress has been made against the transition milestones set, unless it’s not in line with the client mandate.”

Abrdn said it recognises that sustainable change starts with its own operations — and also announced its own target of net zero in operations by 2040.

Abrdn CEO Stephen Bird said: “At Abrdn we are acutely aware of our obligation to support the drive towards net zero.

“That’s why I’m pleased we can announce these climate commitments today – both for the investments we manage and our own operations – which build on those we made earlier in the year.

“But we must be very clear: simply moving our clients’ money out of high-carbon intensity stocks into greener options will not solve the world’s crisis.

“Decarbonising a portfolio is not the same as decarbonising an industry.

“To achieve that we need effective engagement with companies, because more seismic change will come from backing credible transition firms on their path from high to low carbon intensity.

“And asset managers cannot operate in a vacuum.

“Bolder, collective action by governments is desperately needed.

“Effective incentives in the form of appropriate carbon pricing are absolutely critical to enable capital allocation in line with net zero and to create an investment environment which rewards companies and investors that go green.

“We also need a proper debate and action on the role of the tax system in the transition.

“Pricing carbon needs to be focused on changing behaviours, and ensuring a just transition, on a national and global scale.”

About the Author

Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.