Talanx wants to cut the carbon footprint in its fixed income and equities portfolios by 30 percent. What is more, it aims to do this by 2025. To help achieve this goal, Ampega has calculated the Company’s investment portfolio emissions for the first time. But how exactly do you measure the environmental footprint of an equities and corporate bonds portfolio, and how do you cut its carbon intensity? Dr. Kai Ledwig, Sustainable Finance Manager at Ampega, offers some answers in the fourth part of our series on sustainability, “Our Contribution”.
We work together with two major data providers in the area of sustainable investment. These publish updated climate-related indicators, which are based either on actual or on estimated figures, for a large number of companies at least once a year. Carbon intensity – basically the carbon footprint – is one of these indicators. We have aggregated the data from our providers to allow us to cover as many elements of our liquid portfolios (i.e. corporate bonds and equities) as possible. At present, these are the only asset classes for which both valid data and CO2 calculation methodologies exist. This approach allowed us to produce a meaningful analysis both for the Group and for individual subsidiaries.
Our analysis allowed us to identify certain companies in our portfolios that have particularly large carbon footprints. As a result, we are either no longer investing in these securities or are even successively reducing our holdings in them. We use this indicator, which is always viewed in the context of the overall portfolio and relevant market indices, as one of the bases for all our investment decisions. Another key goal is to use our analyses as a force for positive change by investing in climate leaders.
One challenge facing our climate strategy is how we can continue including carbon-intensive sectors so as to ensure a broadly diversified portfolio. We can do this by investing specifically in “climate improvers”, i.e. companies that have set themselves ambitious climate targets. This allows us to actively support change in carbon-intensive sectors. In addition, the more comprehensive the definition of “carbon footprint” is in future, the harder this task will be. To give one example: at the moment we don’t include companies’ indirect greenhouse gas emissions, which are generated by their supply chains or by produced goods, for example. Broadening our approach to incorporate these “Scope 3 emissions”, as they are known, is an additional challenge.
In the short to medium term, we are focusing on liquid investment classes, since these have the most extensive and best data available. And of course illiquid investments such as infrastructure projects will continue to play a very large role. In the medium term, we will develop a policy that will allow us to include additional asset classes such as real estate, for example. What is more, the definition of “carbon footprint” is changing all the time; this also includes the Scope 3 emissions that I already mentioned and that we are aiming to incorporate in the medium term as well. However, there aren’t enough sufficiently reliable data available for this at present. Working together with companies will be another key part of our climate strategy in the near future. We will be actively seeking a dialogue with enterprises so as to motivate them to include climate aspects more in their business models.