ESG Investment Policy
This Environmental, Social and Governance (ESG) policy applies to TCI’s investments in publicly traded equities.
As part of our investment process we assess a range of ESG factors, particularly climate change risk.
TCI believes that climate change-related risks, in particular a company’s greenhouse gas (GHG) emissions, will have a material effect on a company’s long-term profitability, sustainability and investor returns. These risks include regulation, taxation, competitive disadvantage, brand impairment, financing, physical asset impairment and litigation.
We actively engage on ESG to help us understand, quantify and influence a company’s exposure to climate change-related risks and the way it is managing those risks.
We require companies in which we invest to make appropriate and timely public disclosure of carbon and other GHG emissions. Such disclosure should include targets for emissions intensity reduction and absolute level reduction.
TCI fully supports compulsory disclosure on a standardised basis and the use of the Task Force on Climate–related Financial Disclosure (TCFD) reporting framework (www.tcfdhub.org).
In our view, reporting to CDP (www.CDP.net) is the best way to implement TCFD. We expect all our portfolio companies to make full annual public disclosure to CDP.
Low-Carbon Transition Plans
We expect companies in which we invest to have a credible, publicly-disclosed plan to reduce GHG emissions. This plan should include measurable science-based targets that align with the Paris Agreement, which requires full de-carbonisation of economies (net zero emissions) by 2050. We expect the low-carbon transition plan to meet the standards in the CA 100 benchmark (link: CA100 benchmark).
Actions that should be included in a low-carbon transition plan are:
- change business processes to reduce the company’s carbon footprint;
- introduce efficient energy management into buildings and factories;
- source low carbon energy through direct generation or power purchase agreements;
- de-carbonise transport fleets, e.g. through electric vehicles;
- offset emissions from corporate travel, e.g. through afforestation;
- de-carbonise supply chains and helping customers lower their carbon intensity; and
- advocate for regulations which drive the de-carbonisation of their industry to ensure its sustainability.
- We will typically vote against one or more directors of portfolio companies which do not publicly disclose their GHG emissions and do not have a credible or adequate plan for their reduction.
- Company low-carbon transition plans and progress towards GHG emission reduction targets should be published annually and shareholders given an advisory vote at the annual general meeting (AGM). In the event that a portfolio company does not disclose its climate plan, or where (1) the disclosure of emissions is not consistent with TCFD and/or (2) the climate plan is not consistent with the CA100 benchmark, we will seek to table resolutions at AGMs to mandate a disclosure that is consistent with both standards, if we have the requisite voting power and such resolutions are permitted.
- Where we consider a portfolio company’s plan to reduce emissions or its progress towards meeting its emission reduction targets is inadequate we will, where we are able, file an AGM resolution to disapprove of the plan or the company’s progress in implementing its plan.
- It is important the Annual Report and Accounts include material climate risks (link: IIGCC - accounts expectations). We will also vote against auditors where these risks fail to be reported.
We will also evaluate divestment where a portfolio company refuses to disclose its emissions and does not have a credible plan for their reduction.
On an annual basis, we will disclose to all of our investors how we vote and report on the ESG performance of our portfolio companies. We will also explain to our investors the rationale behind our voting at portfolio company AGMs.
Asset Management Industry
TCI believes that all investors should support mandatory GHG emissions disclosure by large companies and require them to adopt credible low carbon transition plans.
Investors should influence such disclosure and emissions management by voting against boards which hide their emissions and have no credible plan for their reduction.
We recommend that asset owners pressure asset managers that have sufficient votes to file an AGM resolution to direct the company to disclose their emissions and low-carbon transition plan. Asset owners should consider replacing asset managers who do not do so.