M&G changes climate strategy to prioritise asset alignment and engagement

M&G Investments has shifted its climate strategy from primarily focusing on portfolio decarbonisation to asset alignment and targeted engagement.

According to its 2025 Climate Transition Plan, M&G has changed its climate targets to move beyond simply reducing portfolio emissions to focusing on companies that are genuinely aligned with the transition to a low-carbon economy.

By introducing new asset alignment and engagement targets, M&G said it will be better able to assess the quality of companies’ transition plans and their resilience through the climate transition, rather than relying solely on carbon footprint metrics, which can be distorted by external financial or methodological factors.

M&G’s new 2025 targets now include assessing whether companies representing 50–70% of portfolio financed emissions (Scope 1-3) have set robust greenhouse gas (GHG) targets and transition plans by 2030, from a 2019 baseline.

Additionally, M&G’s 2025 engagement targets will require that 70% of financed emissions across public equity and fixed income assets must be either engaged or assessed using its Transition Assessment Framework, which is based on the Net Zero Investment Framework guidance developed by The Institutional Investors Group on Climate Change (IIGCC).

Speaking to IPE, Kathy Ryan, chief sustainability officer at M&G, said: “Over the medium and longer-term, financed emissions metrics monitor the direction of travel and act as a guide for reaching our overall ambition.

“However, as part of the development of this Climate Transition Plan, we have assessed the way these metrics behave and noted there are a range of factors that can materially influence financed emissions that currently have low correlation to real world decarbonisation.”

According to Ryan, these factors include financial movements impacting a company’s market value, changes to foreign exchange rates, and improvements to data coverage or methodologies for emissions accounting.

“Given these factors, it was important to supplement this approach with our asset alignment target, that would provide a view of our exposure to companies that are well positioned to remain resilient through the transition, and those ultimately delivering decarbonisation,” Ryan added.

The firm’s new target comes at a time when investors are being urged to put greater emphasis on physical climate risk.

Last month, the Universities Superannuation Scheme (USS) expressed concern over the growing disconnect between the emissions reductions seen in its portfolio and increasing real-world greenhouse gas emissions, adding it treats the rapid pace of portfolio emissions reduction “with caution” because these improvements have not been reflected in real-world outcomes.

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