The investment firm will require its 30 targeted companies to deliver net-zero scope 3 emissions by 2050 and establish transition road maps to achieving the goal.
The companies being targeted span across the oil, gas, metals, mining and utilities sectors.
Aviva’s engagement program will operate between one to three years, depending on company circumstances and incorporate escalation measures for businesses that are not responding quickly enough.
The investment manager has signalled that it is fully committed to full divestment of the targeted companies that fail to meet its climate expectations, with the retracted investments to apply across the firm’s equity and credit portfolios.
Mirza Baig, global head of ESG research and stewardship at Aviva Investors commented the firm’s ESG philosophy promotes engagement over divestment as the more effective method of delivering change and outcomes.
“However, for our engagement approach to have impact, it must be accompanied by a robust escalation process, including the ultimate sanction of divestment,” Mr Baig said.
The responsiveness of the companies will be determined by a qualitative assessment of progress against Aviva Investors’ climate engagement framework and quantitative improvements against the firm’s climate transition risk model.
Aviva will be checking in on their progress in six-month intervals, when it will also determine the need for escalation.
The proposed methods of backlash include voting against directors, filing shareholder proposals and working with aligned stakeholder groups to apply further pressure.
Aviva chief investment officer for equities, David Cummin commented active investment and engagement are “key to promoting company transition and solutions to the climate crisis”.
“By fully integrating our approach across stewardship and the investment teams, we will be able to maximise our ability to influence the companies we have targeted towards positive climate strategies,” Mr Cumming said.
Colin Purdie, chief investment officer for credit at Aviva added creditors have an increasingly important role to play in helping with climate change mitigation and the energy transition.
“Pockets of green finance do not go far enough,” Mr Purdie said.
“Creditors must act decisively and collaboratively to embed sustainable principles across the market, from large public companies to smaller, private high-yield issuers. Credit markets are a potentially powerful but largely untapped force that could exert significant influence on companies through the billions of dollars of debt financing they provide.”
