RESPOND (Resilient and Sustainable Portfolios that Protect Nature and Drive Decarbonisation) is an interactive online tool to help asset managers improve portfolio resilience and alignment with a low carbon and sustainable future through the application of science-based approaches to responsible investing.
Identify key improvement areas to stay competitive, resilient and relevant in a resource-constrained, low-carbon nature-positive future.
The world faces the twin threats of climate change and nature degradation. Each causes and exacerbates the other in a vicious cycle. These planetary emergencies manifest as environmental and social (E&S) threats that create material risks to both society and the economy.
These risks can negatively impact companies’ bottom lines and valuations. Acute physical risks (e.g. floods) disrupt supply chains, while chronic physical risks (like temperature rise) destroy productivity. Regulatory and legal risks arise from increasing incidence of stricter E&S regulations and the ensuing liability of not adhering to such laws. Market risk from shifting supply and demand (toward sustainably sourced products) will leave companies that do not respond in time at a competitive disadvantage. Reputational risks from E&S controversies can lead to depressed demand for a company’s products or loss of the social licence to operate in a particular market.
The finance sector is well positioned to safeguard against these risks. Whether by choice or by law, financiers can guide companies of all sizes and in all industries along a transition to a more sustainable economy. By managing exposure to E&S risks and engaging clients to develop more resilient business models, financial institutions can shift capital flows toward sustainable growth and drive positive impact in the real economy – and therefore in society as a whole. In doing so, financial institutions stand to gain from a wealth of new opportunities in providing sustainable products and solutions.
The Resilient and Sustainable Portfolios that Protect Nature and Drive Decarbonisation tool shows year-on-year changes and highlights progression or regression in asset managers performance on the integration of environmental and social (E&S) considerations in their corporate strategy and decision-making processes.
In 2022, the Energy Transition (ET) and seafood Frameworks were added to the RESPOND analysis. The ET framework was added to assess the extent to which the current panel of asset managers assessed under RESPOND have aligned their energy sector investment practices to the recommended trajectories and timelines for a 1.5 degree pathway.
The seafood sector’s growing importance as a key source of protein, paired with the growing ESG challenges it faces, position it as a key source of both potential financial risk and opportunity. A pilot assessment for select asset managers with seafood-related portfolios has been conducted and will be released in the Sector and Issues in 2023.