Fund Solutions

Managers Back Initiative to Assess Sovereigns on Climate

ASCOR establishes advisory group as part of effort to understand sovereign exposure to climate risk.

Asset managers with a combined US$5.3 trillion AUM have joined forces with a new asset owner-led venture to better probe the climate actions, policies and performance of sovereign debt issuers.

The seven asset managers – Aktia Bank, Amundi, Colchester Global Investors, Franklin Templeton, MFS Investment Management, Ninety One and Wells Fargo Asset Management – have signed up to the Advisory Group for the Assessing Sovereign Climate-related Opportunities and Risk (ASCOR) Project.

Launched in June, the aim of ASCOR is to provide investors with a “common lens to understand sovereign exposure to climate risk and how governments plan to transition to a low-carbon economy”.

ASCOR will enable the current and future climate change governance and performance of sovereigns to be “fairly and appropriately measured, monitored and compared”. This assessment framework, ASCOR said, will then be used to produce an annual public assessment of the climate change governance and climate change performance of sovereigns.

The project is already backed by the BT Pension Scheme, the Church of England Pensions Board, the UN-convened Net Zero Asset Owner Alliance, Ceres, the Institutional Investors Group on Climate Change, the Principles for Responsible Investment and the Transition Pathway Initiative. Chronos Sustainability, a UK-based responsible investment and corporate sustainability strategy and policy development firm, will co-ordinate the project

The seven asset managers will join ASCOR’s Project Advisory Committee, supporting the development of the framework through their investment experience and knowledge of climate change assessment frameworks for sovereigns. SURA Asset Management, Latin America’s largest pension fund provider, has also joined the ASCOR Project Steering Committee.

“The members of our Advisory Committee, along with SURA Asset Management, provide us with a deep knowledge of sovereign assessment processes, and importantly, with perspectives and insights from all the world’s major investment markets. They will help ensure that we develop a tool that is relevant to asset owners and managers, of all sizes and across all markets,” said Victoria Barron, ASCOR Chair and Head of Sustainable Investment at BT Pension Scheme Management.

Consensus on investor expectations

Work on the detailed design of the ASCOR tool will commence in October 2021, and a dedicated website is expected to be launched in mid-2022.

As part of this work, ASCOR aims to develop a consensus about institutional investors’ expectations of government policy on climate change, such as policies, targets, and enforcement mechanisms. Project participants say this will be a key step toward a framework through which investors can understand both the areas of alignment and difference.

“The ASCOR assessment framework may also be useful when investors look at a corporate issuer’s exposure to country risk. For example, an investor may want to factor in the fact that 25% of a mining firm’s operations are in countries without a clear policy framework on a particular area. Further, communication of common investor expectations on aspects of climate mitigation or transition could encourage greater private-public collaboration on common solutions,” said Adam Matthews, Vice-Chair of the ASCOR Project and Chief Responsible Investment Officer at the Church of England Pensions Board, speaking to ESG Investor for its upcoming special report on green bonds.

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