Railpen co-authors the Net Zero Stewardship Toolkit with IIGCC

The Net Zero Stewardship toolkit provides a ‘systematic framework’ for global investors to help prioritise high-impact corporate engagement and hold laggard companies to account. It provides a structured framework for prioritisation, analysis, engagement and voting to enable Net Zero alignment for investors in listed equities. The toolkit also creates a foundation for the stewardship of other assets and gives investors a foundational process to enhance their stewardship practices and deliver the rapid acceleration in decarbonisation required to halve emissions by 2030 and give the world a chance to achieve net zero by 2050.

The toolkit, published in advance of 2022 AGMs for most major public European and North American companies, places emphasis on companies developing and implementing credible transition plans and how investors can hold them accountable. The framework for Net Zero Stewardship within the toolkit contains six key steps. These are:

1. Undertake portfolio analysis and use the stewardship framework for prioritisation of key engagements. A process to identify companies in scope for engagement, prioritise these engagements and allocate resources based on the importance of key companies to achieving portfolio goals and real-world emissions reduction.
2. Set net zero alignment criteria, time-bound company-level objectives and portfolio goals. Development of a framework of company net zero alignment criteria1 to be used to determine if companies can be classified as aligned. Plus, the setting of company level time-bound objectives and milestones that drive stewardship priorities and enable measurement of portfolio alignment goals.
3. Develop an engagement strategy for priority companies. The establishment and implementation of strategies to increase alignment of priority companies, with clear escalation actions to be used where time-bound objectives are not met.
4. Develop a baseline engagement (minimum level) and voting policy approach for all companies. The establishment and implementation of baseline engagement and voting approach to be undertaken as a minimum for the maximum number of companies in material sectors, and clear escalation actions to be used where time-bound objectives are not met.
5. Asset owner and manager alignment and engagement. Guidance to ensure alignment of engagement priorities and objectives to reduce duplication and enhance impact by collaborating where valuable. The toolkit also provides sample IMA templates for review and customisation by investors.
6. Transparency. A framework to inform disclosures on the net zero stewardship strategy.

Chandra Gopinathan, Senior Investment Manager, Sustainable Ownership, Railpen, said:

“Railpen is unwavering in its commitment to creating a better future for our members to retire in. We are particularly proud of the collaborative work that delivered this toolkit, which we feel could be instrumental in ensuring that the world achieves net zero by 2050. We have already begun to embed the toolkit into our stewardship processes.”

“The Net Zero stewardship toolkit emphasises the crucial iterative link between conducting company analysis, where a company might be failing to align to net zero, and the engagement and voting activities that might follow. It provides a standardised foundation for climate-related engagement across listed equities and bonds. This will be expanded to include unlisted assets as well in future versions. It will enable investors to deliver the substantive remedial actions that will drive the change that the world needs to see from us all.”