Climate change has been a core theme of State Street Global Advisors’ stewardship activities since 2014. The prioritization of this topic in our stewardship program is informed by our firm’s view that climate change is challenging companies from both a strategic and business operations perspective.
We believe that climate change and the transition to a lower-carbon world represent a significant and long-term strategic challenge (and opportunity) for all companies across all sectors. Climate change presents challenges to companies as they balance their strategic direction and the commitments and goals they have set, as they make capital allocation decisions and investments in new technologies, and as they manage their reputation against the heightened climate consciousness of investors and consumers. Climate change also offers opportunities for portfolio companies, which may include developing new business lines, mitigating future regulatory risk, building good will with stakeholders, enhancing cost savings through efficiency efforts, and leveraging sustainability practices as a differentiator to enhance firm reputation.
Our approach to climate stewardship is centered around there pillars: voting, engagement, and thought leadership
In 2018, we voted against management 75% of the time, compared to 80% in the previous year. The three companies where we supported the proposal were receiving it for at least the second time, and our vote for reflects the fact that we do not believe they have made sufficient progress on their disclosure and practices. At the company where we voted against, our vote reflects the quality of engagement and the clear alignment of the company’s disclosure on climate risk to the TCFD recommendations.
State Street Global Advisors' Voting on 2o C Proposals in 2016 - 2018
|% With Management||25%||20%||11%|
Engagement Topics include:
Boards are starting to see climate change as a risk that needs to be mitigated, and are responding in a short-term tactical manner to a long-term strategic challenge. While progress is being made on managing climate risk, it is not happening at the pace commensurate with the challenge. Companies are responding tactically to what is a longer term, strategic challenge. This is due partly to the mismatch between shorter term company planning cycles and the longer term nature of climate risk.
More fluency is needed on boards in order to adequately manage climate risks and opportunities.
We are supportive of the work of the Climate Action 100+, an investor initiative to ensure that the world’s largest corporate emitters take necessary action on climate change. While we are not members of the Climate Action 100+, our efforts are aligned and working toward similar goals. Since we began engaging on climate in 2014, we have held comprehensive engagements with 102 of 161 (63%) of the Climate Action 100+ companies.
Friday 1st May 2021 State Street Global Advisors joined the Climate Bonds Partners Program. The partnership allows State Street Global Advisors to support the global development of a capital market which offers the most transparent and effective route to mobilize capital to support the transition to a low-carbon economy.
With investors facing increasing pressure to integrate ESG criteria into their investment decisions and reporting, this partnership will further develop the creation of a trusted standard for bonds. In addition, it will support investors who want to use green bonds to improve the climate profile of their portfolios in a quantifiable way.
State Street Global Advisors is also a significant investor in green bonds and a founding member of the Green Bond Principles, which are incorporated in the Climate Bonds Standard.
We believe climate change is one of the biggest risks in investment portfolios today. These risks impact almost all segments and industries – not just the obvious polluters. However, with climate risk comes tremendous investment opportunity as the economy reworks against the impact of climate change. <<More on Climate Risk Strategies>>
As a signatory of the Task Force on Climate-related Financial Disclosure (TCFD) recommendations, we are engaging with companies to review the quality of their climate reporting and to understand how boards oversee climate-related risks.