Montréal Carbon Pledge: Accelerating investor climate disclosure

“In December, at COP21 in Paris, we witnessed the first concrete global agreement on climate change. What set these climate talks apart was the significant role investors and institutional capital played throughout the summit. We believe that investor action is essential in order for climate strategies to move forward, which is why we launched the Montréal Carbon Pledge in 2014, a commitment by investors to translate climate talk into walk. The first step to managing the long-term investment risks associated with climate change and carbon regulation is to measure them and this initiative sets a clear path forward for emissions reductions.”

Fiona Reynolds, Managing Director, PRI

“Our 2015 Montréal Pledge report covers over €400bn across our largest asset classes, namely equities, corporate debt and sovereign fixed income. This report provides us with a snapshot of historic emissions in these portfolios, which we have disclosed publicly. Benchmarking this footprint data amongst peers enables us to compare not only carbon intensity but also strategic approaches and narratives. AXA will continue to publish this data as well as strive to collect and analyze more dynamic information such as sector-specific climate change mitigation strategies. This will be in line with future recommendation of the FSB TCFD, which we are proud to co-chair, and enable us to contribute to the French «Energy Transition» regulatory disclosures.”

Christian Thimann, AXA Group Head of Strategy, Sustainability and Public Affairs, FSB TCFD’s Vice Chair

Key findings

The Montréal Carbon Pledge: a convincing and successful initiative

• In less than two years, the Montréal Carbon Pledge has mobilized 120 investors from around the world to take action on climate change.

From signing to disclosing

• Whilst it is still mainly supported by large players in the responsible investment industry, implementation of the Montréal Carbon Pledge is underway and 80% of signatories already disclose their carbon footprints.

Large asset owners with varied profiles have adhered to the Montréal Pledge

• European asset managers have also entered the fray, emboldened by government measures in France especially.

Strong contribution of reporting to the methodological debate

• The diversity of reporting methodologies in use reflects the current state of the art. Diversity of the indicators, varying scopes and ill-defined methodologies make comparisons difficult and demonstrate the need to harmonise disclosure methodologies. Identifying common trends in the measurement and analysis of risk and performance is a first step towards this objective.

Barriers to measurement

• The information available on carbon footprinting of underlying assets is still lacking in quality, especially on non-equity assets, indicating the need for more disclosure from the issuers’ side.

Climate change mitigation targets

• In addition to the publication of their carbon footprint, 16% of pledge signatories have already set up emissions reduction targets with the objective of aligning with a 2°C scenario.

Characteristics of disclosure: an overview

• This research identifies a dozen “best practice players,” with varied practices with regards to measuring carbon footprints, benchmarking and analysis intertwined with a range of pro-active approaches. It reveals two simultaneous evolutions in investor practices, in carbon analysis on the one hand, and from emissions measurement to proactive actions for reducing footprint on the other hand.

Investor disclosure practices are evolving rapidly

• Investor practices in addressing climate risk and opportunity are evolving fast, with carbon footprinting part of this evolution. In future, investor focus will likely shift to transition risk and how this can be incorporated within investment decisions, with practices evolving again further.

Montréal Carbon Pledge commitments

”By signing the Montréal Carbon Pledge, investors commit to measure the carbon footprint of their investment portfolios and disclose this on an annual basis.

The Pledge was launched on 25 September 2014 at PRI in Person in Montréal, and is supported by the Principles for Responsible Investment (PRI) and the United Nations Environment Programme Finance Initiative (UNEP FI).

Overseen by the PRI, it has attracted commitment from over 120 investors with over US$10 trillion in assets under management, as of the United Nations Climate Change Conference (COP21) in December 2015 in Paris. Support for the Montréal Carbon Pledge comes from investors across Europe, the USA, Canada, Australia, Japan, Singapore and South Africa.

The Montréal Carbon Pledge allows investors (asset owners and investment managers) to formalise their commitment to the goals of the Portfolio Decarbonization Coalition, which mobilises investors to measure, disclose and reduce their portfolio carbon footprints. Over US$100 billion has been committed to this as of COP21.”

Produced by Novethic in collaboration with PRI