We’ve committed to achieving net zero carbon emissions in the investments we manage by 2050 or sooner. This Q&A elaborates on our commitment, and answers many questions you may have related to this goal.
The Net Zero Asset Managers initiative is an international group of asset managers who have committed to support the goal of net zero greenhouse gas emissions by 2050 or sooner and is in line with global efforts to limit warming to 1.5 degrees Celsius. The initiative was launched in December 2020 and as of Oct 31, 2022, comprises 292 signatories who collectively manage more than US$67 trillion in assets under management—and US$18.4 trillion committed to net zero alignment.
The Institutional Investors Group on Climate Change is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low carbon future. IIGCC has more than 350 members, mainly pension funds and asset managers, across 23 countries, with over €51 trillion in assets under management. IIGCC’s mission is to support and enable the investment community to drive significant and real progress by 2030 towards a net zero and resilient future. This will be achieved through capital allocation decisions, stewardship and successful engagement with companies, policy makers and fellow investors. IIGCC works to support and help define the public policies, investment practices and corporate behaviours that address the long-term risks and opportunities associated with climate change.
The rapid uptake by asset managers and institutional investors across both these organizations (and others) illustrates the growing desire and urgency to collaborate in the fight against climate change in our industry.
We believe it is in the long-term best interests of our Clients. Our first and foremost responsibility is to act in the best interests of our Clients and to help them grow and protect their investments to meet their financial goals—and we believe that supporting the transition to a low-carbon economy ultimately serves our Clients’ best interests. We believe that our global economy will likely benefit from an orderly transition toward limiting the global temperature rise. Shifting towards net zero greenhouse gas emissions within our portfolios will allow us to increasingly deliver more sustainable investment returns to our Clients, while also making the world a more sustainable place for us to live.
We believe it is in the long-term best interests of our company. The physical impacts described above affect companies and governments across the globe. In addition, transition impacts, such as changing regulations and shifting customer preferences, will continue to motivate companies to change how and/or where they do business. All these factors (and many more) can positively and negatively impact the value of businesses, including our own, and therefore, investment capital. Addressing climate change is an inherent part of our role as a trusted and responsible provider.
We believe it is in the long-term best interests of the world. Climate change affects everyone and everything around us. We know that severe climate events (like flooding and cyclones), as well as the impact from more gradual shifts in climate patterns (like rising sea levels or shrinking ice sheets) will increasingly impact government and corporate spending, livelihoods, health costs, and more. These impacts can have a ripple effect on other environmental and social factors, such as biodiversity loss, health and wellbeing, migration, and workplace health and safety. And unfortunately, these repercussions generally affect marginalized communities to a greater extent. So the global fight against climate change is a fight for global prosperity.
We are aligned with our parent company Sun Life. Sun Life’s three sustainability pillars are to foster: financial security, healthier lives and sustainable investing. Our commitment to net zero in our investments supports these pillars.
The time to act is now. We believe climate change calls for urgent action, and our industry must come forward and commit.
The first step in our commitment to NZAM is to determine our 2030 goal. We want to be thoughtful, realistic and transparent in our commitment, while remaining conscious of multiple factors that are likely to influence our net zero journey. To develop our goal, we took into account the current state of the global and domestic economy, infrastructure, investor needs and mindset, the need for global collaboration to address industry-wide challenges, and data limitations.
As a result our goal is that by 2030, we plan to have 24% of our total assets under management (AUM) on the path towards net zero greenhouse gas emissions (GHG) by 2050 or sooner.
We plan to increase this percentage in the coming months and years as the managers we invest with become more aligned with net zero, and as we explore adding additional investment managers and/or investment strategies that are net zero aligned. Given the need to transform our energy, land use, and other systems, we are also committed to increasing our offering of climate-friendly investment solutions.
We are also committed to educating our clients, managers and industry on why this journey is so important. We recognize that not everyone is convinced that net zero is in the best interests of their investments—or even the world. We have an opportunity—and challenge—to persuade the individuals we interact with to trust us to continue to invest in their best interests while also pursuing net zero by 2050 or sooner—and to recognize that these two goals are not mutually exclusive.
Our commitment to net zero is a strategic commitment, which involves all departments, and is supported by our senior leadership. Early in 2021 we established our Sustainability Committee, comprised of senior leaders from a variety of departments across Sun Life Global Investments, as well as other areas of Sun Life. This led to the formation of our Net Zero Working Group, which is a cross-functional team drawing on several areas and consulting broadly across the organization. We seek to create additional working groups as we build our strategic plan and implementation. And of course, our Multi-Asset Solutions Team is central to our net zero strategy as they work to shift our investment solutions toward a decarbonization.
To align with the broader Sun Life net zero goals and sustainability strategy, we participate in, and contribute to, the Sun Life International Sustainability Council. We also engage and collaborate with the sustainability committees across other Sun Life businesses, including the Global Sustainability Team.
Sun Life Global Investments is a “manager-of-managers,” so our funds are invested across a variety of investment managers, and we don’t directly invest in the underlying companies held in our funds. This means that our initial path to net zero implementation in our portfolios is through our manager selection and engagement process. It also means we are uniquely positioned to observe and learn from the various net zero approaches employed by our managers and educate them on best practices. We engage with our investment managers to encourage them to:
We are also in the process of developing:
There are multiple ways an asset manager can move toward decarbonizing a portfolio:
Over the shorter term, it is impossible to predict the impact of a net zero alignment on portfolio returns. However, we believe that economic and environmental, social and governance (ESG) forces will continue to converge and will positively influence companies to become more sustainable. There will undoubtedly be companies that benefit from a path toward net zero and sustainability, and there will be those that will not. And like any other market and industry change, this means there will be opportunities to capitalize on, both for the potential for strong returns or to help mitigate risk.
Our primary objective continues to be to deliver strong long-term risk-adjusted returns that allow our investors to achieve their investment objectives (and long-term financial security). We also believe that as responsible stewards of capital, we should continue to strive to have a positive impact on society through our investment offerings and increasingly, through our direct activities. We believe that these two objectives will increasingly converge over time.
There are many forces at play that may increasingly impact a company’s performance, for example:
And these can impact companies in many areas:
All of this can translate into higher or lower earnings growth (and stock performance) over time.
We believe climate action is one of the most important steps to create a sustainable future for our world. This extends beyond how we manage our portfolios.
Some steps we have taken in our business include:
And our sustainability commitment does not stop with climate action. We have established seven key priorities to help guide us in our overall sustainability journey, and we will continue to share our progress on each of these priorities.
All investment solutions are offered as segregated funds for group retirement plans exclusively by Sun Life Assurance Company of Canada, through Sun Life Group Retirement Services, a member of the Sun Life group of companies.
Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada, and Sun Life Financial Trust Inc.
SLGI Asset Management Inc. is the investment manager of the Sun Life Mutual Funds, Sun Life Granite Managed Solutions and Sun Life Private Investment Pools.
© SLGI Asset Management Inc. and its licensors, 2023. SLGI Asset Management Inc. is a member of the Sun Life group of companies. All rights reserved.