Hi
We work with a number of organisations seeking to set SBTs where it is unclear if they should be categorised as FI’s.
They are all fiduciary services business offering some combination of corporate services, fund admin and trust business. For the latter they are corporate trustees for private clients and pensions (generally) so are legal owners of substantial assets including listed portfolios, unlisted equity, family businesses, cash, real estate, boats, cars, planes etc.
Generally their ability to select investments is limited however they can set a policy of prohibited assets for example or mandate exclusions. They can and should also be considering capex on real estate to adapt to climate change and other activity that preserves value generally.
Do you have any trustees setting targets for their investments and can you opine on whether a fiduciary should be classified at an FI? Even as a corporate it is my understanding they’d need to calculate category 15 anyway to understand if it constitutes more than 33% of scope 3 emissions?
Thanks
Michelle
Hi Michelle, I would suggest checking to see if any of the organizations’ activities map to those listed in Table 1 of the SBTi Financial Institutions Near-Term Criteria Version 2.0 (pages 15-19). It sounds like equity and fixed income investments (e.g., in listed or unlisted companies), real estate, and potentially AIWM may be relevant.
Hi
As the legal owner of assets they invest through managers or directly into listed equity, funds, corporate bonds, sovereigns etc. So yes their activity is relevant.
They act on behalf of their client structures with fiduciary responsibility for the assets and to manage them in the interests of beneficiaries.
Do you have any technical information or resources that we can share with this type of client which stipulates they should be treated as an FI and why? Anything that definitively lists trustees as a type of business that should follow the FI sectoral guidance.
There is some push back that their influence over assets is limited. My argument generally is that that is the same as an asset manager as they have to act in accordance with a mandate but they can choose to only offer climate aligned mandates. Trustees can choose to manage client assets in accordance with climate science as that is ultimately in the best interest of their beneficiaries anyway, both in a financial sense but also from a welfare perspective.
I just need to be able to show them SBTi information that shows they should be treated as an FI.
Thanks
Michelle
Hi Michelle, the criteria apply to the listed activities but do not list out all the different entities that may do those activities. If helpful, page 6 of the above document states:
These criteria apply to financial institutions (FIs). The SBTi defines a financial institution as
an entity that generates 5% or more of its revenue from investment, lending or insurance
activities. This includes but is not limited to banks, asset managers and private equity firms,
asset owners and insurance companies, and mortgage real estate investment trusts (REITs)…The Financial Institutions’ Near-Term Criteria cover the subset of activities and asset classes described in Table 1 below…
And pages 13-14 of the SBTi Financial Sector Near-Term Science-Based Targets Explanatory Document Version 2.0 touch on real economy companies with financial activities.