In Esgaia, it’s possible to create custom engagement templates, to align data capture and monitoring with e.g. specific teams, asset classes, or topics. In this case study we demonstrate how to implement a net zero engagement framework in Esgaia, modeled against the Net Zero Investment Framework (NZIF).
In order to drive the transition of underlying assets over time, investors should set specific alignment criteria, assess the current and forward-looking alignment of assets, and communicate their expectations together with suitable engagement objectives.
To help guide investors, there are several different frameworks available to support their net-zero ambitions, including how to engage with issuers on climate change and transition plans.
The Net Zero Investment Framework
The Net Zero Investment Framework (NZIF) is the most widely used guide by investors to set targets and produce related net zero strategies and transition plans. In June 2024, the organisations behind the framework released the updated NZIF 2.0.
NZIF guides investors on how to assess and disclose the baseline alignment of assets in scope, using the specified criteria relevant to each asset class. As it regards active ownership, it is expected that investors set an engagement threshold target which immediately ensures that at least 70% of scope 1 and 2 financed emissions in material sectors are originating in assets that are either categorised as achieving net zero, aligned to a net zero pathway, or are subject to engagement and stewardship actions. This threshold should increase at least to 90% by 2030 at the latest.
Criteria underpinning alignment assessment
For listed equity and corporate fixed income, the following criteria are used to assess the alignment of a transition plan and its underlying objectives.
Criteria:
The criteria provides a consistent and seamless conceptual base between the assessment of assets and the improvement of their alignment to a net zero pathway. Criteria or objectives broadly cover:
Ambition, emissions targets, performance, and disclosure,
How emissions reductions are going to be delivered, and
Additional alignment criteria that companies within a high impact material sector need to meet, covering capital allocation alignment and decarbonisation plans.
Alignment categories:
NZIF consistently uses four categories of alignment, representing progressive steps towards alignment with a net zero pathway:
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
Implementing a net zero template
A net-zero engagement framework should reflect a criteria-based engagement and voting strategy for nonaligned assets and issuers, with clear escalation strategies. Depending on the baseline position, investors should set time-bound (ideally annual) objectives and longer-term goals for companies, while adjusting for sector-specific alignment criteria as appropriate.
The video further below outlines how to implement a net zero engagement template in Esgaia. It highlights the following:
Template creation: Admin users are able to define engagement templates with voluntary and mandatory fields to be populated by other users when creating engagements.
Objectives:
The objectives reflect the criteria outlined above. For each objective, users can add additional information such as notes and files.
If implementing a thematic template, you will see an aggregated progress overview for the applicable companies.
Milestones & monitoring progress: To mark progress against the objectives, in this example, we have included the different Alignment categories as Milestones under each objective.
Reporting: As a core feature of Esgaia, all of your engagement and activity records can be exported, either on a company-level or aggregated, to support reporting and more extensive analytics.
Please contact us to discuss how our software can empower your stewardship efforts and net zero engagements!