Climate and Nature report 2023 1
Climate and Nature report 2023 CONTENTS
Climate and Nature report 2023 Foreword by the CEO
Climate and Nature report 2023 We are committed to
Net Zero
Climate and Nature report 2023 Governance
Climate and Nature report 2023 Strategy
Climate and Nature report 2023 Risk management
HANDELSBANKEN FONDER – RISK MANAGEMENT 12 CONTENT
S Foreword by the CEO We are committed to Net Zero Governance Strategy Transitional risks and opportunities Transitional risks and opportunities are similarly identified and assessed for the corporate investment portfolio using a tool by ISS ESG. The analysis is based on the Net Zero 2050 scenario (NZE2050) from the International Energy Agency’s World Energy Outlook series, which corresponds to a 1.5°C temperature increase (aligned with the recommendations of TCFD and ESRS E1 – AR 12). Risk management Metrics and targets Nature Glossary The model identifies three types of transitional risks: 1. Policy transition risks: Changes in cost and revenue due to changing policy environments. 2. Market risks: Effects of carbon prices for relevant sectors. 3. Technology risks: Changes in relative price and demand for fossil fuel technologies and low-carbon technologies. About risk Past performance does not predict future returns. The value of the money invested in the fund can increase or decrease and there is no guarantee that all of your invested capital can be redeemed. Note that a fund with risk level 5-7 as stated in the fund’s key information investment document (KIID) can vary greatly in value due to the fund’s composition and management methodology. A summary of investors’ rights as well as a prospectus, fund rules and KIID are available for each fund at handelsbanken.se/fonder. Risks and opportunities are assessed towards a long-term (2050) scenario, although the effects are assumed to be realised gradually in both the near and mid-term. Through the changes in demand and costs, the model estimates the financial effect and derives the company’s Transitional Value at Risk (TVaR) – the estimated change in share price resulting from the impact of transitional events. As an additional measure of the exposure to transitional risks ISS calculates a Carbon Risk Rating (CRR). This is scored 0-100, where a company with the score 0-24 is classified as a laggard, 25-49 is classified as underperformer, 50-74 as performer and 75-100 as leader. Integration of scenario analysis The insights gained from the scenario analysis can be integrated into our investment decision-making processes in several ways: 1. Risk Management: The results of the scenario analysis help us identify and quantify the potential climate-related risks in our investment portfolios. This information can be used to develop risk mitigation strategies and adjust our portfolio allocations as needed. 2. Opportunity Identification: The scenario analysis also highlights potential opportunities arising from the transition to a low-carbon economy. This information can be used to identify companies and sectors that are well-positioned to benefit from the transition and consider them for investment. 3. Engagement and Stewardship: The scenario analysis results can be used to inform our engagement activities with investee companies. We engage with companies to understand their climate risk management strategies, encourage the adoption of best practices, and support their transition efforts. 4. Reporting and Disclosure: We use the scenario analysis results to enhance our climate-related disclosures and provide transparent information to our stakeholders about the potential impacts of climate change on our investments. By integrating scenario analysis into our investment processes, we aim to build resilience in our portfolios, support the transition to a low-carbon economy, and deliver long-term value to our clients. “We take an integrated approach to risks related to climate change, and work continuously to improve our risk management processes.” Our long-term success as an asset manager is dependent on our ability to identify, assess and manage risk. We consider climate change to be a long-term and evolving systemic risk to the global economy, affecting not only industries and individual companies, but potentially also entire asset classes such as equities and bonds through its potential impact on the global economy. We take an integrated approach to risks related to climate change, and work continuously to improve our risk management processes. Company-wide exclusion Sector exclusion forms the first line of defence against climate risk in our risk management process. We use exclusion primarily when a sector has high sustainability risks, is not aligned with our vision of long-term sustainable asset management, and when we believe our ability to influence companies to align with sustainable development is limited. Management of identified risks
Climate and Nature report 2023 Metrics and targets
Climate and Nature report 2023 Nature
Climate and Nature report 2023 Glossary