34 www.ppf.co.uk Responsible Investment Report 2019/20 35 Managing climate change risks and opportunities – continued A p Climate-related disclosure High-level findings p Identifying opportunities r Our exposure to o Whilst sectors such as renewable sustainable forestry Transparency and regular reporting are essential aspects The initial results of the assessments carried out on ach energy are clearly likely to benefit We have approximately £600 million of responsible investing and we are committed to our listed global equity and credit portfolios are shown from a transitioning economy, invested in timberland, with regional disclosing to our internal and external stakeholders. In below. Both portfolios are less carbon intensive than their we also recognise that some exposure mainly across Australia & relation to climate disclosure, we recognise that there benchmarks in terms of their exposure to operational sectors face larger challenges New Zealand, Europe and the US. is no single commonly agreed measurement of climate- carbon emissions. Scenario analysis indicates that some to decarbonise, such as cement We use a combination of primary related risks and opportunities, and we will continue companies within both portfolios could be associated and aviation. However, alternative and secondary funds, as well as co- to examine the most appropriate metrics to track our with potential transition risks due to their exposure to technologies or materials present investments to gain exposure. progress. We have expanded our ESG data coverage high carbon-intensive activities (e.g. in utilities, energy growing opportunities in other to provide us with a range of metrics at a portfolio and materials sectors). We have also started measuring sectors such as timberland and and issuer level – including scope 1, 2 and 3 carbon physical risk exposure for the listed global equity and Within our forestry investments, E transportation infrastructure, for we track the share of timberland emissions; climate value-at-risk measures; extractive credit portfolios, where coastal flooding is likely to be the xe example, increasing timber demand c fossil fuel revenues and reserves data; and physical risk most significant hazard. These findings have been useful u (by hectares) certified under major t within construction in place of datasets on various climate-induced events. in informing our conversations with our active external io cement; and rail travel substituting universally recognised third-party managers, and guiding our involvement in the various n demand for flying. systems for timber certification investor initiatives highlighted already. – the Forest Stewardship Council We believe that there are (FSC) and the Programme for the opportunities for some of our real Endorsement of Forest Certification Scope 1 + Scope 2 carbon footprints of our Transition Risks within Global assets in a decarbonising economy, (PEFC). We continuously engage and have identified forestry assets with our forestry external managers publicly listed Global Equities and Global Equities and Global Credit portfolios: as a key area. Forestry has a strong to explore carbon accounting Credit portfolios (as at 31 Dec 2019): potential to contribute to the for nature-based solutions. We Equity portfolio: Global Credit portfolio: Equity portfolio: Global Credit portfolio: are currently tracking carbon L mitigation of CO emissions, and o 2 sequestered from a number of • Weighted Average • Weighted Average • Sectors most at risk: • Sectors most o there is an increasing demand for k forestry plantations and are looking in carbon offsetting, with sustainable Carbon Intensity* Carbon Intensity* Utilities, Energy, at risk: Utilities, g f to expand this metric throughout our = 290 tCO e/USDm = 250 tCO e/USDm Transportation, Transportation, o forestry assets as one of a few viable 2 2 r holdings. w nature-based solutions. revenue revenue Materials Energy, Materials ar • Over 30% lower than • Over 20% lower than • Exposure to • Exposure to d the respective Global the respective Global extractives by MV = extractives by MV = Certification of timberland (the PPF’s share) Equity benchmark Credit benchmark 4% lower than Equity 36% lower than Credit Number of hectares Proportion % benchmark benchmark • Portfolio warming • Portfolio warming Certified timberland in accordance with 440,579 98.2% potential = 11% lower potential = 5% lower the FSC and/or PEFC than Equity benchmark than Credit benchmark Timberland in the process of certification in 742 0.2% accordance with the FSC and/or PEFC Land that is sustainably managed in accordance 997 0.2% Physical Risks most exposed to in Opportunities for Global Equities with the FSC and/or PEFC, but cannot be certified our publicly listed Global Equities and Global Credit portfolios: Other 6,271 1.4% and Global Credit portfolios: Equity portfolio: Global Credit portfolio: Equity portfolio: Global Credit portfolio: Coastal Flooding, Coastal Flooding • Exposure to • Exposure to renewable Extreme Heat • Sectors most at risk: renewable energy- energy generation by • Sectors most at risk: Software & Services, generation by MV MV = 9% lower than Software & Services, Consumer Services, = 55% higher than benchmark Autos, Transport, Transportation, benchmark Utilities, Banks, Utilities, Technology Telecoms, Technology, Energy, Materials * We have used the Weighted Average Carbon Intensity (WACI) of Scope 1 + Scope 2 tonnes of CO equivalent emissions per million USD of 2 revenues metric, as currently recommended by the TCFD (holdings as at 31/12/2019). 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