Aviva Investors: Multi‐asset ESG update: What have banks got to do with climate change?

21 October 20202 | Shane O'Brien, Senior Investment Director

In the first of a new regular series on how ESG considerations are integrated into our multi‐asset investment process, Shane O’Brien explains how consistent engagement with a well‐known UK financial institution led to a positive commitment on climate change.

Integrating environmental, social and governance (ESG) considerations is a core part of the investment process for our multi‐asset portfolios. In the first of what will be regular updates on how we’re doing this, we focus on our efforts to tackle the biggest, long‐term threat facing the planet, economies and financial markets: climate change.

We have talked in the past about work we have done with companies like BP to press them to transition their business away from fossil fuels. This month, we look at perhaps a less obvious example of our engagement efforts to tackle this issue, with a look at the banking sector and our recent work with Barclays.

The issue 

• Barclays began 2020 as one of the worst‐performing European banks on climate change with no clear plan in place on how it can help address this issue.
• What does a bank like Barclays have to do with climate change? Quite a lot actually; it is one of the top lenders to huge fossil‐fuel projects. 

The action 

• We initiated an intense period of engagement on the issue, including meeting the chairman on four separate occasions in 2020.
• We encouraged the bank to view this as an opportunity to establish a market‐leading climate strategy for the sector and shared our perspective on this would look like. 

The outcome 

• Barclays took on board our suggestions and brought a new climate plan to its Annual General Meeting in May, which received 99 per cent shareholder support.
• Barclays has now committed to becoming the first major bank targeting net‐zero emissions across its entire financing activities, notably moving beyond the requirements of the original shareholder resolution. In the process, it has essentially gone from a climate change laggard to a leader.
• We continue to work closely with the bank as it develops a detailed climate framework and roadmap to achieve its ambitious objectives.

Engaging with companies to improve their ESG practices can have far more impact than simple exclusion

We hold Barclays within our MAF range. This is another example of why engaging with companies to improve their ESG practices can have far more impact than simple exclusion. We believe this is the right thing to do as it can really help drive significant change and lead to better outcomes for investors over the longer term.