Responsible Investing

A company’s carbon emissions are categorised in three buckets – Scope 1, Scope 2 and Scope 3. This has become the global standard for reporting emissions globally.

SCOPE 1 These are the greenhouse gas emissions that a company makes directly — for example while digging up coal (for a coal miner), making a t-shirt (apparel manufacturer), operating its planes (airline).

SCOPE 2 These are the emissions a company makes indirectly by running its business, for example, the emissions in the electricity bought to run the business.

SCOPE 3 These are the emissions a company is responsible for, up and down its supply chain. These are typically significant in number. For an iron ore miner, Scope 3 emissions are the emissions produced by its customer making steel with the iron ore.

It is Scope 3 emissions that are typically the most challenging to reduce because a company doesn’t control those emissions. Having said that, companies can work with customers to achieve emission reductions if they are large enough.

Yes but exactly how depends on the fund.

Across all of our funds, returns are our primary objective. This is our investment objective.

In our active strategies, our job is to understand the impact of climate change on earnings and share prices and invest accordingly. Right now, in our Australian Equity Fund, it’s the energy transition and the way companies are decarbonising their businesses that we spend the most time analyzing. Other issues we consider include the risk of stranded assets and the price of carbon offsets. These are impacts that we factor into our decisions to buy or sell companies in our portfolio.

We are also passionate about engaging with the companies we own and using our seat at the table to drive real change. We take the knowledge we have about companies’ transition plans and either hold them to account or encourage them to do more. We do this work across all of our funds.

Strictly speaking, a carbon footprint is the total emissions brought about by a person or company. In an investment context, a carbon footprint typically refers to a company’s Scope 1 and 2 emissions divided by revenue (revenue is a proxy for company size). The term for this type of carbon footprint is carbon intensity.

We calculate the carbon intensity of companies we invest in. We also calculate the carbon footprint of our investment portfolios. We then consider the portfolio’s carbon footprint against the appropriate benchmark. For the Platypus Australian Equity Fund, the benchmark is the S&P/ASX 300.

Net zero is a reference to the need to completely decarbonise our world by 2050, with any carbon that is still emitted by 2050 being offset (hence the “net” in net zero). This comes from the United Nations Intergovernmental Panel on Climate Change, which states that if temperature rises are not kept to a maximum of 1.5 degrees Celsius later this Century, the world faces dangerous climate change.

The IPCC warns that we will only keep global temperatures at or below 1.5 degrees Celsius if carbon emissions are net zero by 2050.

As active owners, we work to improve the performance of companies on environmental and social issues in areas where we can make a difference. We do this because engaging with companies on ESG issues can lead to better investment outcomes and we have an opportunity to encourage companies to do better on environmental and social issues on our clients’ behalf.

We typically carry out our engagement work by meeting companies one-on-one. Who we meet with at these companies depends on the issue, how long we’ve been engaging on the issue, and whether we need to escalate the issue to the C-suite or the board. Remuneration-related or governance issues are typically only raised with the board.

We have two key engagement streams:

1. Company-specific engagement where we identify opportunities to improve ESG practices in our investee companies.

2. Thematic engagement where we seek to tackle significant industry-wide ESG issues to drive change such as climate change and modern slavery, often with other investors in collective engagement groups.

Company-specific engagement work might aim to improve a company’s executive pay practices, its treatment of customers or employees or its carbon emissions targets while our thematic engagement work focuses on a systemic issue like climate change and seeks to drive change at the company level.

You can read more about the engagement work we do in our annual engagement report.

We are committed to being as transparent as we can around our ESG activities including the way we vote at company meetings on our clients’ behalf.

We publish our voting statistics every year in our engagement report.

Yes we do. It can be viewed here.