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Commentary General

Update on WHEB’s carbon emission reduction commitments

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WHEB’s core intention is to invest in companies that are proving solutions to sustainability challenges. In addition to the positive impact that these companies have through their products and services, it is also essential that the emissions generated in the manufacture and provision of those products and services are reduced in line with a 1.5°C limit of global warming. Below we give an update on the progress our portfolio companies have made at setting net-zero targets and reducing emissions, as well as the progress WHEB has made at decreasing emissions within our own operations.

Over half of WHEB’s portfolio is committed to net-zero carbon emissions

As a signatory to the Net-Zero Asset Managers Initiative, WHEB is committed to ensuring that, by 2030, 100% of our portfolio have set net-zero carbon (NZC) targets and are able to demonstrate alignment with a trajectory towards 1.5°C limit of global warming. At the end of 2020, 10% of our portfolio had committed to being NZC by 2030 with a further 14% committed to net-zero by 2050. Over the course of 2021 and the first half of 2022 we’ve seen several changes to the portfolio. In early 2021 we sold Kingspan, a supplier of materials and solutions that reduce energy consumption in residential and commercial buildings, which had committed to NZC by 2030. This reduction was offset in early 2022 when we bought Spirax-Sarco, an engineering firm focusing on increasing energy efficiency within industrial processes, which has an equally stringent target. This has led to a small increase to 11% of the portfolio committed to NZC by 2030. Much more significant though has been the dramatic growth from 14% to 40% in the proportion of the portfolio committed to NZC by 2050. Consequently, WHEB has achieved our interim target of having at least 50% of the portfolio committed to achieving NZC emissions by 2050 at the latest. We had hoped to achieve this by 2025 and so have met this target three years early.

Of the 51% of the portfolio committed to achieving NZC by 2050 at the latest, 85% are either in the process of being– or have already been – approved by the Science Based Targets initiative (SBTi). Of the top five emitters in WHEB’s portfolio (making up 77% of the total financed emissions), four have committed or had targets approved by the SBTi. This is a key area of focus for WHEB’s engagement strategy, with over 16% of our portfolio engagement in 2021 specifically focused on the setting of NZC targets.

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Figure 3: An increasing proportion of WHEB’s strategy is committed to achieving NZC

Delivering reductions in carbon emissions in the real world

However, the reporting of emissions and the setting of targets is not sufficient to see real-world carbon reductions, it is essential that emissions are actually reduced. At the portfolio level, our financed emissions have decreased dramatically year over year, largely due to the divestment of China Everbright Environment Group, whose main business focuses on waste-to energy. However, there were a number of companies in the fund that did deliver real world carbon emission reductions in their scope 1 and 2 emissions. Of our portfolio companies, 60% reduced their total absolute emissions between 2020 and 2021, with almost 50% achieving a downward trend of total emissions over the past 5 years. Some significant reductions came from Silicon Labs, a semi-conductor and electrical component manufacturer, who have reduced their scope 1 and 2 emissions by 29% since 2018, and Vestas, the world’s largest manufacturer of wind turbines, which has managed a 22% reduction in scope 1 and 2 emissions since 2017. Clearly, to limit global warming we need to see absolute reductions in emissions across all the portfolio, and the economy in general.

WHEB’s operational emissions

In 2021 we completed the first full estimation of all relevant scope 3 emissions (purchased goods and services, business travel, waste generated in operations, employee commuting). The emissions associated with business travel have been monitored since 2017, and the effect of the pandemic can be clearly seen with a 94% reduction in business travel emissions in 2021 when compared with our 2019 base year. As we begin to travel to see more clients and investee companies, we expect this figure to increase, however we remain focused on reducing this figure to meet our 2025 net-zero carbon target for our operational emissions. One example of this is WHEB’s travel policy that requires employees to take the train when travelling for business for any journey that is under 6 hours.

The shift to working from home has caused the employee commuting category, which includes emissions associated with home working, to be the largest contributor to our operational emissions (excluding investments). WHEB has now initiated a hybrid working model with most employees returning to the office for at least two days per week. This will reduce emissions associated with home working. These emissions were calculated using a survey sent to all employees with questions regarding their working from home habits. One result of the survey was confirmation that 88% of WHEB employees are on a “green” electricity tariff, with 22% of employees directly using renewable energy.

Pushing our suppliers to do more

WHEB’s engagement strategy is not purely focused on portfolio companies, but also extends to the suppliers of goods and services to our own operations. For new contracts and contract re-negotiations, we require that suppliers monitor and report their carbon emissions, in addition to setting targets for emission reductions. In 2022, we aim to have 60% of our suppliers setting emission reduction targets, increasing to 80% in 2023. As a B Corp, we aim to work with other B Corps wherever possible which increases our confidence that our suppliers are also committed to managing their environmental impact.

Next steps

Despite the ongoing issue of lack of available data, WHEB’s own data analysis increased in quality when estimating the positive impacts associated with our portfolio companies. The impact calculator, referenced in our annual impact report showed an increase in the quality of the data from 87% in 2020, to 94% in 2021 as assessed by the Carbon Trust. Even with this improved level of data quality, there is a long way to go before in terms of data quality. Many companies are not yet reporting emissions, particularly scope 3, and when data providers attempt to estimate emissions, the results can vary significantly. With these estimation techniques being so subjective it is essential that more companies begin to report their emissions, including what many are calling “scope 4”, the avoided CO2e that occurs with the use of more efficient or lower carbon products or services. WHEB has demonstrated our continued commitment to transparency and accountability by reporting all emissions calculated in 2021 in a CDP disclosure which will be publicly available later this year, as well as committing to have our net-zero targets approved by the SBTi.

Important Notices:
Risks include: the price of shares (“Shares”) in FP WHEB Sustainability Fund, WHEB Sustainable Impact Fund or WHEB Environmental Impact Fund may increase or decrease and you may not get back the amount originally invested, for reasons including adverse market and foreign exchange rate movements. Past performance does not predict future returns. The Fund invests in equities and is exposed to price fluctuations in the equity markets, and focuses on investments in mid-sized companies in certain sectors so its performance may not correlate closely with the MSCI World Index (the benchmark). For full risks, please see fund prospectus on www.whebgroup.com

 

General: This information, its contents and any related communication (altogether, the “Information”) is issued by WHEB Asset Management LLP (“WHEB Asset Management”). It is intended for information purposes only and does not constitute or form part of any offer or invitation to buy or sell any security including any shares in the FP WHEB Sustainability Fund or WHEB Sustainable Impact Fund, including in the United States. It should not be relied upon to make an investment decision in relation to Shares in the FP WHEB Sustainability Fund or WHEB Sustainable Impact Fund or otherwise; any such investment decision should be made only on the basis of the Fund scheme documents and appropriate professional advice. This Information does not constitute advice of any kind, investment research or a research recommendation, is in summary form and is subject to change without notice. The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming shares. WHEB Asset Management has exercised reasonable care in preparing this Information including using reliable sources, however, makes no representation or warranty relating to its accuracy, reliability or completeness or whether any future event may or may not occur. This Information is only made available to recipients who may lawfully receive it in accordance with applicable laws, regulations and rules and binding guidance of regulators. WHEB Asset Management LLP is registered in England and Wales with number OC 341489 and has its registered office at 7 Cavendish Square, London, W1G 0PE. WHEB Asset Management LLP is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 496413.

 

FP WHEB Sustainability Fund

FundRock Partners Limited (formerly Fund Partners Limited) is the Authorised Corporate Director of the Fund and is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 469278 and has its registered office at 6th Floor Bastion House, 140 London Wall, London, EC2Y 5DN. The state of the origin of the Fund is England and Wales. The Representative in Switzerland is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the Paying Agent is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, 8024 Zurich . The relevant documents such as the prospectus, the key investor information document (KIIDs), the Articles of Association as well as the annual and semi-annual reports may be obtained free of charge from the Representative in Switzerland.

 

WHEB Sustainable Impact Fund

The Manager of the Fund is FundRock Management Company S.A., authorised and regulated by the Luxembourg regulator to act as UCITS management company and has its registered office at 33, rue de Gasperich, L-5826 Hesperange, Grand-Duchy of Luxembourg. The Representative in Switzerland is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the Paying Agent is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, 8024 Zurich. The relevant documents such as the prospectus, the key investor information document (KIIDs), the Articles of Association as well as the annual and semi-annual reports may be obtained free of charge from the representative in Switzerland. The state of the origin of the Fund is Ireland. The Fund is registered for distribution to professional investors in Austria, France, Germany, Italy, Luxembourg, Norway, Singapore, Sweden and the United Kingdom, and is registered for offering to retail investors in Switzerland, Denmark and the Netherlands. The Fund is also available for professional investors in Belgium and Hong Kong. It is not available to investors domiciled in the United States.

 

WHEB Environmental Impact Fund

The Manager of the Fund is FundRock Management Company S.A., authorised and regulated by the Luxembourg regulator to act as UCITS management company and has its registered office at 33, rue de Gasperich, L-5826 Hesperange, Grand-Duchy of Luxembourg. The Fund is registered for distribution to professional investors in the United Kingdom. It is not available to investors domiciled in the United States.

 

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