Insights
How does Stonehage Fleming manage Climate Risks?
The global Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 with the aim of enhancing and expanding the reporting of climate-related financial information. Here, Stonehage Fleming's Sustainability & Stewardship Officer explains the approach to managing climate risk exposures within Group’s investment division.
Responsible Investment has history at Stonehage Fleming. As an investment manager we believe we can effect positive change, by acting thoughtfully and responsibly in engaging with the companies in which we invest directly and the third-party managers to whom we allocate capital. For us, this conviction has translated into a continuous process of challenging ourselves on how to be good stewards of our clients’ capital.
A multi-generational investment outlook requires an acute awareness of our risk exposures. Climate change presents an increasing material risk. However, it also presents opportunities for specific investments that seek to reduce or mitigate its effects. As responsible stewards of our clients’ capital, it is crucial that we have a robust understanding of climate dynamics and engage with investee companies and third-party managers on their climate governance.
Climate risks and opportunities are manifold. The potential impacts of climate change are as complex as the global economy. While some investment assets might be more impacted by physical risks such as heatwaves or flooding, others might be more at risk of being impacted by ‘transition risks’, such as regulatory change.
Through climate analysis and risk monitoring, we can make well-informed, long-term investment decisions in the best interests of our clients. TCFD presents an opportunity to review our approach to climate change. Preparing our first disclosures for TCFD has meant that climate and climate risk management have been firmly placed on our agenda. We have tightened our climate governance process and conducted a review of our investment portfolio and operational risk exposures, including engaging with all our third-party managers on their climate governance processes.
Knowing our climate change exposures matters. For our Stonehage Fleming Investment Management investment portfolio, we have identified below benchmark exposures to high emitting sectors, as well as to regions that are expected to be most affected by climate change. We have also identified widespread climate risk governance to be in place with the managers we invest with. This means that with high probability, our overall climate risk exposures are lower than those of the overall market[1]. Having recently moved our London office to a BREEAM certified building further helped us reduce our operational climate impacts.
For further details please see our recently published 2023 TCFD entity report here.
[1] This is derived from our exposure to high risk sectors being low that that of the ACWI, as per our TCFD report strategy section.