Hi,
I’d like to know if investments in collectives are in scope (requirement) of target setting? The investments are considered indirect and there is typically limited influence and engagement to effect climate strategies. From the guidance there is some reference to mutual funds which may be categorised similarly, are collectives therefore treated the same? And what specifically is the guidance around these if data and ability to impact is low?
Hi Sanya and welcome to the community,
Collectives are generally in scope. As you can see in table 5.2 on page 56 in our guidance, ETFs should be included. In footnote d it also says “Mutual funds covering required activities in listed equity and bonds are also required”. You also see in the same table that real estate mutual funds are in scope. So, collectives meeting those criteria are in scope.
Data availability can be an issue for collectives, but this is a part of the engagement process, to influence asset managers, in this case, to at least be more transparent (preferably set emissions reduction targets) so that you can evaluate what you are actually investing in. It is similar to common stock investments. Some companies disclose more and some less data. Some have set emissions reduction targets and some have not. One of the important objectives of setting targets is to also engage with third parties to improve disclosure and transparency and utlimately to influence more companies, including asset managers, to set targets. That should be part of the process of reaching the targets. Failing this, divestment can be an alternative, but from SBTi’s perspective, engagement is much preferred.