CNS-Responsible-Investing 2024 - Flipbook - Page 29
Our Approach
Our Climate Working Group plays a central role in
embedding climate-related insights into both investment
and risk management processes. Formed by merging
our climate transition and physical impact working
groups, this uni昀椀ed e昀昀ort enhances collaboration across
investment teams and improves how we incorporate
changes in policy, regulation, and market expectations
more broadly into our house views. The group evaluates
climate scenarios, assesses the implications of climate
transition planning, and identi昀椀es emerging areas of risk
and opportunity, energy transition trends and carbon
emissions management.
This research informs two critical areas of our ESG
integration policy:
• Investment Opportunity: Climate-related data and
analysis are embedded into investment decisions,
helping us identify leaders and laggards within the
investment universes, and support our overall view of
issuer valuation and alpha generation.
• Risk Management: By fully understanding our
exposure to various climate risks, our investment
teams can better position portfolios to limit
potential downside exposure as part of the larger
investment process.
By combining sector expertise, climate data, and
thematic research, our investment teams are better
equipped to navigate the evolving role our portfolio
companies play in the larger climate transition. We strive
to generate dynamic, scalable, and results-oriented
analysis, and processes, to better align with end goal of
long-term value creation and preservation.
Initial Insights and Findings
Our analysis shows meaningful variation in climate risk
exposure and preparedness across and within sectors.
In listed real estate, emissions intensity is in昀氀uenced
not just by property type but by factors such as energy
sourcing and regional policy. For example, while data
centers tend to have higher operational emissions,
those with renewable energy strategies show stronger
transition readiness.
In infrastructure, we 昀椀nd that carbon intensity alone
is not a complete indicator of risk. Some high-emitting
sectors, like utilities, may be better positioned due to
credible decarbonization plans, while others with lower
emissions but limited transition strategies face growing
regulatory and market pressure.
Regarding physical climate risk, we assess issuers down
to the asset level, highlighting those with outsized
exposure to acute events like hurricanes and wild昀椀res,
as well as chronic risks such as sea level rise and
extreme heat/drought. We also consider a company’s
ability to manage these risks through real world e昀昀orts
such as including infrastructure hardening, insurance
coverage, as well as asset maintenance improvements.
These insights help us better understand the unique
challenges our portfolio companies face and help shape
our ongoing engagement and dialogue with them.
Climate and Scorecard Evolution
As part of our broader e昀昀orts to more systematically
integrate climate-related risks and opportunities
into investment decision-making, we have continued
to re昀椀ne our proprietary ESG scorecards. Aiming
to rede昀椀ne how our investment analysts work with
the ESG Scores and underlying datasets, the 昀椀rm
began by implementing signi昀椀cant data management
improvements to ensure consistent, comparable, and
timely climate data.
With a stronger and more transparent foundation,
enhancements include the customization of various
normalized carbon-intensity metrics, proprietary carbon
target assessments, and sector-speci昀椀c emissions
analysis. These elements play a key role in the 昀椀nal
E Pillar score and topline ESG score of our investee
companies, strengthening the explanatory power and
overall usefulness of ESG integration.
COHEN & STEERS | RESPONSIBLE INVESTING 29
