Wellington Management Case Study

Net Zero Asset Managers initiative: Target disclosure announcement – Wellington Management

What does your initial interim target look like?
We have initially committed to manage 10.6% of our total assets under management in line with net zero – approximately USD 146 billion. We have set a baseline of 2019 and by 2030 intend to either have invested in a percentage of companies with science-based targets that is consistent with a linear increase from the baseline to 100% in 2040, or to achieve a 50% reduction in average carbon intensity.

Can you elaborate on the methodology and scenarios you have used in setting this target?
Our approach is aligned with a combination of the SBTI Guidance for Financial Institutions and the Paris Aligned Investment Initiative’s Net Zero Investment Framework. We have taken a combined approach which allows options focused on engagement and portfolio construction. Each investment team determines which approach is most consistent with their philosophy and process and implements it accordingly as the default proposed approach for clients with net zero targets. Targets are set using either a science-based pathway to 1.5°C or a 50% reduction in greenhouse gas emissions by 2030.g

How did you approach deciding what to include in scope for your initial target?
We are holding ourselves to a high standard of accountability in setting our target. The funds included are only within asset classes where there are well-established methodologies for decarbonisation and where we have approval from clients and commitment from investors to implement an objective consistent with net zero by 2050 or sooner. Current factors affecting our ability to increase our target include our business model – nearly 90% of our business is made up of separately managed and sub-advisory accounts, availability of appropriate methodologies and sufficient data, and tools for implementation. We intend to update our commitment as we reach new milestones, such as establishing an actionable climate plan for a new asset class or receiving additional client approvals and hope that we can accelerate our climate action development plans in the coming years.

What are you plans when it comes to setting a policy on coal and other fossil fuel investments?
We have a client exclusion policy in place, which was updated in October this year. It covers climate risk in relation to thermal coal extraction and power generation, and oil sands extraction, evaluating companies based on revenue thresholds, reserves and announced phase-out plans. More than 90% of our cross-border sponsored funds are covered by this policy.