The sustainability of your investments

The carbon footprint of your investments indicates how much a company contributes to CO2 emissions. Measuring and comparing these emissions to a benchmark helps us see if a company is meeting its environmental goals.

What exactly is CO2?

CO2 (carbon dioxide) is a greenhouse gas naturally present in the Earth’s atmosphere. It ensures that the heat from the sun is retained. CO2 emissions primarily come from burning fossil fuels, but humans and animals also emit CO2. High CO2 emissions accelerate global warming. Trees and plants absorb CO2 and convert it into oxygen, but this is not enough to halt warming.
Other greenhouse gases also have harmful impacts. Since their impacts vary, all emissions are converted into CO2 equivalents per year, expressed as tCO2e.

The CO2 emissions of your portfolio

In your quarterly report, you'll find the following infographic (with different figures). What do these figures mean? First, we sum the greenhouse gas emissions (tCO2e) of all companies in your portfolio and adjust this by the amount you have invested in them. We then compare this to the benchmark. In the infographic, you'll see:

1. the average CO2e emissions of the equity portion of your portfolio
2. the tCO2e of the benchmark

In this example, the difference between the two numbers is 162. The lower your score is below the benchmark, the better. To provide more context, we equate this to the CO2 emissions of round-trip flights between Amsterdam and New York. Here, 162 tCO2 corresponds to 94 round-trip flights. This calculation is made with the help of the independent website CO2 Emissiefactoren.

To determine the greenhouse gas emissions of companies, we collaborate with data provider ISS Oekom, which analyzes emissions per company. They tally both direct emissions from their own sources and indirect emissions from purchased energy.

The ESG risk score indicates how sustainable a company operates. The abbreviation ESG stands for:

• Environmental
  How does a company commit itself to, for example, reducing CO2 emissions, water use and waste? Does the company recycle? Does the company report on its own impact on the environment?
• Social
  Does a company provide safe working conditions and good pay for employees? Is there a policy against discrimination, for example? How does the company treat its suppliers? What is the company doing to keep child labour out of its production process?
• Governance
  Is the company prone to corruption? How is the supervisory board composed? Is the company lobbying the government? How transparent is the company about the policy and its activities

What is the ESG risk score of your portfolio?

Your quarterly report features an infographic like the one below (with different numbers) that shows the ESG risk score and the benchmark for comparison. A score below the benchmark is favorable. Data is based on ESG research by our partner, Sustainalytics. But what exactly is displayed in that chart?

At the top, you see three colored blocks. The blue block shows total risk exposure, which is the cumulative ESG risk from companies in your portfolio. The green-gray section represents mitigated risk, which is the portion of risk the companies have under control. The dark green part is the uncontrolled portion, indicating the ESG risk score for companies in your portfolio. In the example, the ESG risk score is 52 – 34 = 18.

The lower section of the chart shows your ESG risk score alongside the benchmark. Below, a chart categorizes ESG risk scores from Very Low to Very High. A score of 18 falls in the Low category, while the benchmark is in the Average category. Scores of 30 or above are considered High, and 40 or above as Very High.

In 2015, the United Nations established the Sustainable Development Goals (SDGs), aimed to be achieved by 2030. Your quarterly report shows how your portfolio positively or negatively contributes to a better world in line with these goals.

The SDGs include 17 goals, such as:

• No poverty
• Zero hunger
• Good health and well-being
• Gender equality
• Clean water and sanitation
• Responsible consumption and production
• Climate action

How positive or negative is the impact on the SDGs of the companies in your portfolio? Your quarterly report shows this, based on data from ISS Oekom. Scores calculated by ISS Oekom are displayed in a pie chart and bar chart.

The pie chart provides a quick view of the proportion of companies in your portfolio with either a negative or positive impact. A similar chart for the benchmark allows for comparison.

The bar chart shows 15 sustainability categories derived by ISS Oekom from the SDGs, including social and environmental categories like Ensuring health, Contributing to sustainable energy use, Providing education, Achieving sustainable agriculture and forestry, and Saving water. The chart indicates the percentage of companies in your portfolio with a positive or negative impact in each category.

The Paris Agreement is a treaty that was adopted in 2015 by 195 member states of the United Nations to combat global warming. Your quarterly report shows whether your investments align with the Paris Agreement's objectives.

If you invest sustainably with ABN AMRO Portfolio Management, you will see in the report you receive how your investments contribute to achieving the objectives of the Paris Agreement.

What are those objectives? The key goals include:

• Limiting global temperature rise to a maximum of 2°C by 2050, with efforts to further limit the increase to 1.5°C
• Reducing greenhouse gases and harmful substances as quickly as possible
• Re-evaluating objectives every 5 years based on current scientific understanding of climate change and adjusting as necessary

The Paris Agreement in your report

Our dataprovider, ISS Oekom determines the expected future emissions of the companies in your portfolio. ISS Oekom calculates each company's future emissions based on its sustainability strategy and industry.

Your report features an infographic with timelines on the x-axis and tCO2e amounts on the y-axis. The green bar indicates the expected emissions of companies in your portfolio. The yellow marker shows the 'emission budget' for your portfolio each year, which is the allowable amount to meet the Paris Agreement guidelines. As regulations tighten, the marker moves left in future years.

By comparing these 2 elements, we can assess if your portfolio aligns with the Paris Agreement objectives.