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Net Zero targets the reduction of total greenhouse gas (GHG) emissions to a point where any emissions produced are balanced by emissions removed. We are committed to supporting the goals of the Paris Agreement to hold global temperature increases to 1.5C above pre-industrial levels and achieving net zero by 2050 or sooner.
We view climate change considerations through a fiduciary lens, with a focus on financial performance and risk management.
This should result in better long term financial outcomes for the companies and securities in which we invest on behalf of our clients.
We believe that it is the role of governments to establish clear, coordinated and stable policies and regulations to enable markets to transition to net zero in an orderly fashion.
We believe that, over time, climate change and the transition to net zero will impact almost all securities and asset classes. As active investors, we consider climate risks and opportunities by taking environmental factors into account as part of our security analysis. Through active management, we can help our clients navigate the transition by being dynamic and responsive to changes in valuation, technology, regulation and investment time horizons.
We engage constructively with companies to encourage a thoughtful transition to net zero that we believe will deliver better outcomes for investors. We advocate for greater transparency for climate related information and data. We will generally vote against independent directors in high emitting sectors where we believe there is a data transparency gap.
For most of our clients, their sole objective is risk-adjusted financial performance. For these portfolios, integration of ESG* related risks and opportunities forms part of our fundamental research process. Some clients choose to extend their investment objectives beyond financial considerations alone and in such cases, we will work with them to develop solutions that meet their needs.
* ESG considerations form a part of our overall research process, helping us alongside other factors to identify investment opportunities and manage investment risk. This is known as ESG integration. However, we may conclude that other attributes of an investment outweigh ESG considerations when making investment decisions.
We have set a target to be net zero by 2040. We have published TCFD and SASB disclosures since 2020 and 2019 respectively and plan to enhance our TCFD reporting to include climate scenario analysis.
In April 2022 we became a signatory of the Net Zero Asset Managers initiative (NZAM); an international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner.
The commitments we have made as signatories of NZAM are entirely in line with our fiduciary responsibility and there is no change to our existing investment process. At T. Rowe Price, climate transition is considered as part of our ESG analysis and fully integrated into our fundamental research and portfolio construction where appropriate.
In April 2023 we made our initial disclosure, confirming our assets committed to net zero.
Our considerations for the initial AUM commitment are rooted in process, alignment with investment styles, quality of data and measurements.
The strategies not committed fall into four categories: (1) strategies invested in corporate securities that lack adequate GHG emissions data (min. 75%) to make an informed net zero assessment; (2) strategies that predominantly invest in emerging markets or specific sectors lacking realistic pathways to achieve net zero by 2050; (3) strategies that predominantly invest in asset classes lacking a net zero methodology (sovereign, securitized and municipal bonds); and (4) strategies with short-term investment styles (cash funds, short, ultra-short, and low duration strategies) or strategies that do not have net zero as a consideration within their investment process (quantitative and index funds).
We expect our committed assets to increase over time as data coverage improves, net zero methodologies for assets classes such as sovereign bonds get developed, and we launch net zero products.
** AUM commitment figures are unaudited and may be subject to change
We have established policies to support our investment activity and our approach to net zero.