Our progress on climate change
Climate change will increasingly affect us, wherever we are in the world, whatever our standing. As evidenced in a report by Oxford University in partnership with Pictet, climate change is arguably the defining issue of our time.
Our commitments and convictions
For Pictet, climate change represents both an urgent challenge and an opportunity to build a more sustainable economy. We believe it will have a material impact on asset prices and investment returns in the coming years. This is why our investment teams have articulated a common investment philosophy on climate and developed a set of actionable Climate Investment Principles, underpinned by robust research and months of iteration across investment teams. The resulting convictions are:
Climate change will have a material impact on asset prices and investment returns.
The investment decisions taken today will have a strong bearing on how climate change and its consequences ultimately unfold.
No economic system will be immune to the impacts of severe climate change, therefore such a risk cannot be easily diversified or hedged.
Our governance and risk management systems must be fit to enable the delivery of this climate action plan.
It is therefore our fiduciary responsibility to play an active role in accelerating the global economy’s transition towards a net-zero emissions future, in line with climate science. This means leveraging all tools at our disposal to effect positive change, including our own assets and operations, how we manage our clients’ assets and use our influence.
As a privately-held firm, we have the strength of independence and a governance that holds us accountable to the next generation. While this unique structure does not require the same level of reporting as publicly listed firms, we are especially committed to transparency when it comes to climate and other environmental factors.
Transparency will be key to solving the climate challenge. As investors, we depend on the transparency of the issuers in which we invest to obtain the data we need and to understand their transition pathways. Material environmental and social disclosures help us make better capital allocation decisions, and ultimately contribute to the transition. This is why we have committed to the initiatives and standards below.
To ensure a science-based approach to target setting, Pictet also supports the Business Ambition for 1.5 degrees from the Science-Based Targets Initiative (SBTi).
Task Force for Climate Related Financial Disclosures (TCFD)
We have endorsed the Task Force for Climate Related Financial Disclosures (TCFD) in order to strengthen our governance, strategy and risk management; measure climate-related risks; and assess green-investment opportunities. In 2022 we published our first TCFD-aligned CDP report (formerly the Carbon Disclosure Project). In 2023 we will publish our first TCFD report and progressively incorporate material TCFD-aligned disclosures in our annual reporting.
While initially we have focused mostly on climate-change mitigation, we have also started the interlinked work needed on climate adaptation and other environmental topics like biodiversity.
Our levers of climate action
In 2020, we outlined our Responsible Firm ambitions to 2025. This helped us identify key levers of action for conducting our own activities and for managing assets on behalf of our clients. These levers can also be activated in the context of climate action, read more about our progress so far:
Managing clients’ assets
The vast majority of the assets we actively manage for clients are held in portfolios that integrate ESG factors. To support our work, we developed a proprietary ESG scorecard that provides a focused view of ESG risks and opportunities. We are continually expanding the asset classes and indicators we track to better evaluate the climate change threats to our portfolios.
Responsible products and solutions
Pictet has been a pioneer in responsible investments, with a range of strategies that direct capital towards companies that provide environmental solutions. Our Global Environmental Opportunities, Water, Clean Energy and Timber funds raised CHF 6.8 billion in 2021 to reach CH 33.7 billion in total at the end of 2021.
Our active ownership strategy aims to improve the ESG performance of the companies we invest in through proxy voting and direct engagement. Climate change is one of Pictet’s four engagement priorities, and two others, water and nutrition, are linked to climate-change adaptation. We believe investors can be more effective if they work together, so we actively support and participate in several climate-related collaborative investor initiatives.
Where relevant data are available, we strengthen reporting on the ESG characteristics of client portfolios and the impact of active-ownership activities. Where data is missing, we encourage issuers to report according to international standards. When relevant, we report on our strategies’ exposure to the United Nations Sustainable Development Goals.
Research and thought leadership
We use our internal resources, expertise, and external partnerships to raise awareness and generate capital for the net-zero transition. Some of our emerging-markets research is linked to this: we published Bonds that build back better, in partnership with the Institute of International Finance (IIF) and Climate change and emerging markets after Covid-19 together with Oxford University.
Managing our own assets
Investing our balance sheet
Since the end of 2020, our balance sheet has effectively been fossil-fuel free. We also no longer use our balance sheet to seed investment strategies with fossil-fuel producers and extractors and have never offered commercial loans to any such organisations.
Throughout the year, we engage with our colleagues on climate and sustainability topics and help them get involved in local initiatives. We have also rolled out a responsible investing training programme for corporate supporting functions. The training includes dedicated content on climate change, with emphasis on a just transition. By January 2023, over 70% of the ~2,500 corporate functions’ associates had already completed this training, with the rest expected to complete it over the coming months.
Managing our direct environmental impact
In 2007 we set an objective to reduce the average carbon footprint per employee (emissions intensity) by 40% before 2020. By end 2020, we had beaten that target, thanks partly to covid lockdowns, reducing emissions intensity by 73% from 2007 levels.
Following updated guidance, we set a new target to cut our scope 1 and 2 emissions by 55% by 2030 compared to 2019 levels. By the end of 2021, we had got to -17%.
Advocacy and partnerships
We are a founding member of the Institutional Investors Group on Climate Change (IIGCC) and supporters of the Task Force on Climate-Related Financial Disclosures (TCFD). We have also reported and published our answers to the Climate Disclosure Project (CDP). We are committed to driving change in the financial-services community and are a signatory of both the Principles for Responsible Investment and the UN Principles for Responsible Banking.
The way forward
We do not aspire to be the leader of the financial services sector when it comes to climate, because for us all to win, there can be no losers.
It is in our collective best interest that we all take first place in this race. For our clients, we compete against our peers on our services and offering; for the planet we are committed to collaborating with our peers, as well as industry bodies, policy makers and other organisations.
There is no silver bullet to address climate change. It will require ingenuity, imagination, courage and long-term focus – the same qualities that humans have deployed in the battle against Covid-19. It will also require pursuing a shared collective ambition of limiting warming to 1.5˚C, deliberate planning, shifting capital and increased transparency throughout the system.
Mitigating the risks of climate change, while identifying and pursuing the inherent opportunities for our clients, are not only key strategic priorities for us, but also our fiduciary duty. The Pictet Group has survived and prospered for over two centuries by taking a responsible, long-term approach to business and to the management of our clients’ wealth. In doing so, we have always considered not only the interests of the present, but also of future generations.