We view climate change considerations through a fiduciary lens, with a focus on financial performance and risk management.
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Our approach to Net Zero
Climate change poses a significant risk to the global economy and the stability of financial markets. We can help our clients navigate the transition to net zero by conducting robust analysis on the climate-related factors impacting the companies and other issuers in which we invest and offering net zero solutions.What is Net Zero?
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.
Our Climate Beliefs
As an Asset Manager, we are a fiduciary.
We support the goals of the Paris Climate Agreement because we believe that a smooth climate transition will create a more stable economic environment, reduce uncertainty and enable business investment.
This should result in better long term financial outcomes for the companies and securities in which we invest on behalf of our clients.
Governments lead the way.
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 in active management of climate risks and opportunities.
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 believe in active, engaged ownership.
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.
We believe our role is to help clients determine how climate impacts their portfolios and provide solutions that meet their needs.
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.
As a corporate entity, we are committed to achieving net zero across our own operations.
We have set a target to achieve net zero in scope 1 and 2 emissions by 20401. We are committed to reducing scope 1 and 2 emissions by 75% by year-end 2030, compared with our 2021 baseline. We publish our progress annually in our Taskforce on Climate-related Financial Disclosure (TCFD) report and have supported the TCFD recommendations since 2020.
1Scope 1 (direct emissions from owned or controlled sources) and scope 2 (indirect emissions from the generation of purchased electricity, steam, or cooling). Targeting achievement by year-end 2040.
Our Commitments to the Net Zero Asset Managers initiative
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.
- T. Rowe Price Group, Inc. is committing 59%** of total assets under management as of December 31, 2022.
- Mandates with specific climate and net zero related objectives are included in this commitment and represent less than 1%** of total assets under management as of December 31, 2022.
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
Learn more
We have established policies to support our investment activity and our approach to net zero.
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