Name Aberdeen Standard Investments (ASI)
Signatory type  Investment manager
Region of operation Global
Assets under management £544.6bn (2019)
Fund Aberdeen Standard SICAV I - European Equity Fund
Sector Commodity chemicals, Residential real estate, Integrated utility manufacturing
Geography covered Europe
Asset class Equities
Environmental objective Mitigation and adaptation
Economic activity All

ASI recognises the merit of the EU taxonomy initiative. It is extremely valuable for investors to be able to identify and objectively classify business activities that materially contribute to climate mitigation and other sustainability objectives. While we appreciate the many challenges in developing this framework, we believe that increasing transparency is crucial, both from our viewpoint and that of our customers. Indeed, we aim to integrate taxonomy data into our investment decision-making and reporting frameworks.

Taxonomy implementation

Principles, criteria, thresholds

We leveraged Bloomberg’s WATC EUTAX tool to assess eligibility while using our core knowledge of companies not defined as eligible by BICS NACE taxonomy-aligned sectors.

We analysed the TEG (Technical Expert Group) final report, alongside its annexes and the Excel Tool, to ascertain where alignment might lie within each company. Once we established potential areas, we made an assessment of the company’s annual report and non-financial disclosure. Our objective was to identify disclosure that would support alignment.

Do no significant harm assessment

We used MSCI ESG Manager to screen for DNSH across the following criteria:

Environmental Safeguards

  • Environmental Land Controversies
  • Environmental Waste Controversies
  • Environmental Toxic Controversies
  • Environmental Water Controversies

As the criteria used by MSCI and the Technical Annex are not exactly the same, placing these scenarios within the taxonomy was problematic. Nevertheless, despite the lack of a more closely aligned dataset, we were able to make a partial assessment.

Social safeguards assessment

We used MSCI ESG Manager for screening of the following social safeguards:

  • Labour Compliance
  • Human Rights Compliance
  • UN Global Compact Compliance

Though MSCI screens were somewhat closer to the Technical Annex on social safeguards, we would seek to use more strictly aligned screens in our formal reporting.

Turnover/capex/opex alignment

We looked at corporate disclosure (annual reports) to estimate taxonomy alignment.

Additional comments

It was a time-consuming and somewhat labour-intensive process to assess alignment, as companies have yet to report EU Taxonomy-aligned revenue/opex/capex. Our expectation is that this should improve going forwards as companies report alignment.

Alignment results

Based on weighted holdings:

  • 12% of the fund is eligible for EU taxonomy adaptation and mitigation criteria, according to Bloomberg BICS criteria
  • 2.17% of the fund is aligned with the EU taxonomy – 1/31 holdings
  • 9.81% of the fund is potentially aligned with the EU taxonomy- 7/31 holdings

The fund has very little exposure to the NACE/BICS categories deemed eligible for EU taxonomy, hence the limited percentage of revenue alignment. For example, the electricity, agriculture, construction, water supply, real estate and transport sectors are not represented.

This lack of eligibility presents an anomaly, as the portfolio’s carbon footprint is substantially lower than its benchmark. Consequently, there are conflicting signals on the carbon profile of this portfolio.

Company level examples:

SAP (Systems Applications and Products):

  • BICS 3 - Application Software, BICS4 code 18121013, NACE Sector Name: Information & Communication
  • Bloomberg WATC EUTAX - not eligible
  • Taxonomy Category - Information & Communication - data processing, hosting and related activities
  • Potentially aligned - 20% (Cloud Revenues, 2019)
  • Comment (based on manual search of annual reports and knowledge of the company) - SAP owns and runs a number of data centres with a reported average PUE (power usage effectiveness) of 1.58 in 2019 (EU average is 2, while a PUE of 1 is SAP’s target). The company aims to improve energy efficiency, for example, by running 100% renewable energy data centres; the “green cloud”. However, it fails to report whether data centres are aligned with the EU Code of Conduct for data centres, nor does it disclose the percentage of revenues or centres that are currently fully powered by renewable energy. Cloud revenue was 20% in 2019, so we can verify that this percentage is potentially aligned.
  • SAP also provides data capture and processing software that includes capabilities to measure and assess carbon emissions and assist in their reduction. Taxonomy definitions do not currently cover ICT software solutions that bring about a reduction in carbon emissions (“Context-specific digitalisation solutions for resource efficiency“) and therefore are not currently eligible or aligned. However, they are expected to be included in future versions of the taxonomy (Technical Annex p.362).
  • DNSH - no results from MSCI screen though good scores on internal assessment

Challenges and solutions

1 Automating assessment of alignment for all companies We undertook manual searches of company information, from meetings and public disclosures. However, this would not be viable for a portfolio of 100 companies.
2 Lack of relevant disclosure by companies for EU Taxonomy criteria  We leveraged knowledge and searches of company disclosure to make informed estimates. We also requested aligned revenue or capex figures from companies.
3 Limited number of industries with EU taxonomy criteria can skew the climate risk of the portfolio and send conflicting investment signals. For example, results may reveal limited taxonomy eligibility for industries/sectors with a low carbon footprint. Conversely, portfolios may have good taxonomy eligibility  We believe that more work on industry classification for eligibility and alignment is necessary.
4 DNSH data from MSCI can be backward looking, with allegations overshadowing the actual detection of malpractice. As such, determining whether DNSH is applicable can be challenging. We made an informed decision on the information provided, based on company engagement and relevance to the taxonomy.


It would be beneficial for participants to engage with companies in providing EU taxonomy-aligned reporting, which would help investors ascertain alignment.