Edinburgh Investment Trust Half Yearly Report - Flipbook - Page 11
THE EDINBURGH INVESTMENT TRUST PLC / STRATEGIC REPORT / 9
development, and instead may score loans based on longer
term risks, including climate exposures. Others may take a
more blunt approach, refusing to finance projects that do
not have specific climate related targets and management
in place. Each approach has costs and benefits associated
with it and the GFT takes these into account when
engaging with management and when analysing the
company for inclusion in the Trust. The importance comes
in understanding what matters most – and then engaging,
voting, and making investment decisions with that in mind.
EXAMPLES OF ENGAGEMENT ON CARBON
ISSUES
In the last year, the team undertook several engagements
with holdings that focused on carbon. Two examples are
HSBC and Standard Chartered. In both instances, the GFT
aimed to understand how the groups take carbon and
climate change exposures into considerations when making
loan or funding decisions. The team wanted to understand
what factors these banks see as ‘red lines’, if any; what
time horizon the groups use when thinking about climate
related exposures; and how the evaluation of exposures
impacts the cost of borrowing money, if at all.
HSBC
During engagement with HSBC in February 2023, the
group reported that it is building a new centre of excellence
in terms of net zero which includes regional hubs with
focus on regulatory changes. The focus will also cover
carbon impacts related to real estate (commercial and
residential), shipping, oil and gas, utilities, and agriculture.
When evaluating projects, HSBC assesses clients’ transition
plans and whether clients’ plans align with net zero. In
assessing clients’ transition plans, HSBC uses sectorspecific indicators over 3 areas: climate transition plans,
policy compliance and finance related emissions. HSBC
has a policy to phase out the financing of coal-fired power
and thermal coal mining in the EU from 2030 and in the
other markets by 2040. The group engages with clients
with the greatest material exposures to help formulate a
decarbonisation plan that is stretching but achievable.
HSBC’s approach to carbon also covers its underwriting
activities, as well.
JAMES DE UPHAUGH
Portfolio Manager
20 NOVEMBER 2023