Union Investment
Union Investment Holding is a German company offering solutions for institutional, retail and real-estate clients. Union Investment joined the Net Zero Asset Managers Initiative in November 2021.
Percentage of assets covered by the Net Zero Asset Managers Commitment Statement
41% of total AUM (USD $170.4 billion)
Information on interim target(s) covering the proportion of assets to be managed in line with net zero
Baseline(s):
Portfolio coverage baseline
Baseline performance (in % of financed Scope 1-3 GHG emissions of significant GHG contributors; see clarifications below)
• Not aligned/insufficient information ~36% of financed emissions (of significant GHG contributors)
• Committed to aligning ~32% of financed emissions (of significant GHG contributors)
• Aligning ~32% of financed emissions (of significant GHG contributors)
• Aligned ~0% of financed emissions (of significant GHG contributors)
• Achieving net zero ~0% of financed emissions (of
significant GHG contributors)
Engagement threshold baseline
Baseline performance (in % of financed Scope 1-3 GHG emissions of significant GHG contributors; see clarifications below)
•Not aligned/insufficient information ~36% of financed emissions (of significant GHG contributors)
• Committed to aligning ~32% of financed emissions (of significant GHG contributors)
• Aligning ~32% of financed emissions (of significant GHG contributors)
• Aligned ~0% of financed emissions (of significant GHG contributors)
• Achieving net zero ~0% of financed emissions (of significant GHG contributors)
57% of the overall Scope 1-3 financed emissions are subject to direct or collective engagement and stewardship actions in relation to climate topics
Target(s):
Portfolio coverage target
By 2025, all significant GHG contributors must at least be committed to aligning towards net zero. By 2030, all significant GHG contributors must at least be aligning towards net zero. Moreover, we expect issuers to achieve a new level of net zero alignment at least every five years. Linearly interpolating from the baseline performance to 2030, this would result in roughly 60-65% of financed emissions of significant GHG contributors being aligned with net zero.
Engagement threshold target
By 2025, all significant GHG contributors must at least be committed to aligning towards net zero. By 2030, all significant GHG contributors must at least be aligning towards net zero. Moreover, we expect issuers to achieve a new level of net zero alignment at least every five years. Linearly interpolating from the baseline performance to 2030, this would result in roughly 60-65% of financed emissions of significant GHG contributors being aligned with net zero.
Based on our Portfolio Coverage Target we will have more than 70% of financed emissions subject to direct climate change-related engagement well before 2025. The core of our climate change strategy is based on focused and systematic engagement. As described above, we currently focus on the significant GHG contributors in our investment portfolio. This will result in exclusive and direct climate change-related engagements with roughly 70% of overall financed GHG emissions. In addition to that, we already engage individually with companies inter alia on climate change issues which are also part of the collaborative engagements via e.g. UN PRI, IIGCC, CA100+, and CDP/SBT. As a result, these engagements will also be strengthened. This approach makes it highly likely that by 2030 almost all of our financed greenhouse gas emissions are subject to at least collaborative stewardship action on climate change with the large majority being subject to direct, individual engagement.
GHG scopes included:
For the Portfolio Coverage Target and the Engagement Threshold Target we calculate financed GHG emissions based on Scope 1, 2, and 3. We expect companies to set long-, medium-, and short-term GHG targets based on Scope 1, 2, and 3. Setting those targets in all scopes is mandatory for all significant GHG contributors. This implies that we expect to achieve GHG reductions in all scopes. However, the necessary 50% reduction in financed emissions compared to 2019 (which we expect to achieve by 2030) is currently based on Scope 1 and 2 only. When scope 3 data quality increases over the next years we will assess whether the 50% reduction in financed emissions can also be achieved in scope 3.
Methodology:
Net Zero Investment Framework
Scenario(s):
When assessing the global carbon budget associated with limiting global warming to 1.5°C above pre-industrial levels, we mostly rely on the estimations provided by the IPCC (AR6) based on TCRE percentiles 50th and if possible 67th. Those estimations are up-to-date compared to the ones in the IPCC special report on global warming of 1.5°C. We also qualitatively consider the relevant uncertainties in the Earth System if possible. The IEA Net Zero by 2050 scenario can inform us on specific sector pathways based on those carbon budgets. However, it should be noted that global greenhouse gas emissions are currently not at all on track for 1.5°C warming. Still, we expect the companies that we engage with to reduce their emissions in line with those 1.5°C trajectories (net zero emissions across gases and scopes by 2050 at the latest; at least -50% by 2030; and no increase in emissions as of now).
Additional information
Proportion of AUM committed:
We have adopted a whole-of asset class approach. Our target currently comprises listed equity and corporate fixed income (~41% of AUM). Union Investment also has got considerable holdings in real estate (~16% of AUM). There is already a long- term climate neutrality goal for our real estate division in place but this is at the moment being translated into short- and mid-term targets. Apart from real estate, the proportion of our AUM not yet in scope (sovereign bonds and other minor asset classes) equals roughly 43%. However, we expect to achieve close to 100% of AUM being managed towards net zero by 2030 as methodologies continue to be developed.
Policy on coal and other fossil fuel investments:
Yes. Since 2020, we have excluded investments in securities from companies that regularly generate more than 5% of their revenue from the production of thermal coal; the threshold for coal-fired power generation is set at 25% if no credible coal phase-out plan is available. We will progressively lower the percentage cap for thermal coal mining and coal-based power generation to zero by 2025 and 2035, respectively. This applies to all our funds. Our sustainable funds currently work with thresholds of 5% for thermal coal mining and 10% for coal-fired power generation, respectively. Similarly, they are not allowed to invest in fracking or tar sands (>5% revenue). Climate change-related funds and institutional mandates apply stricter exclusion policies. By Board decision in 2021, we will develop a general phase-out policy for oil and gas production in the next years.
Further information: