Net Zero

Embarking down the long road ahead

In 2021, Breckinridge joined with over 225 asset managers representing over $50 trillion in managed assets, in committing to be net zero by 2050.

Breckinridge had already agreed to support the goals of The Paris Agreement in 2017 through the We Are Still In initiative, and subsequently the America Is All In initiative, however we believe the Net Zero Asset Managers initiative (NZAMi) adds intentionality to this support.

As noted in the introduction, sustainability at Breckinridge is governed in part by the firm’s nine-person Sustainability Committee. Upon the launch of the NZAMi, management requested the committee consider the implications of signing the pledge.

After several months of consideration and analysis, in December of 2021, the committee recommended the firm join the NZAMi. The recommendation was based on three key factors:

  1. We believe that climate change is a long-term secular risk with increasingly material investment implications.
  2. We believe economies will indeed transition over time to be carbon neutral, which will create both risks and opportunities for our clients.
  3. As an independent firm, founded on a mission to connect long- term investors with responsible borrowers, Breckinridge’s culture reinforces a strong sense of purpose and stewardship.

In our consideration of the NZAMi, the committee established the recommendation around four key elements:

  1. The commitment to NZAMi should be rooted in an investment case as defined by the investment team.
  2. Breckinridge must be able to develop and advance a feasible and compelling net zero investment strategy, consistent with our firm’s broader investment approach.
  3. Each business unit within the firm must understand the specific commitment and business implications for their team.
  4. Governance of the commitment must be top down. The commitment should be made by the firm’s senior leadership team and include support from the Board of Directors.

Through the process, we have increasingly appreciated the firm’s existing foundation that supports our commitment. This includes our status as a Benefit Corporation and our long-standing culture of sustainability, as well as our firm-level decision to establish climate governance with an approved Climate Policy and Framework for Action and TCFD reporting in our annual corporate sustainability report. It also is backed by our decade of integrating ESG factors into our investment process. We believe transition risk analysis is a logical extension of ESG integration. In 2013, we began engaging with issuers, specifically on sustainability topics, a practice which will lend itself well to the commitment of engaging with companies through the NZAMi. Ultimately, we believe that our commitment to net zero doesn’t change our investment or firm philosophy, it reinforces it.

We were well-positioned to make this commitment as we have had longtime partnerships with climate-focused organizations like Ceres (including our participation in the Climate Action 100+ initiative), we’ve written several public comment letters regarding climate action, and are signatories to various initiatives including the America Is All In initiative, mentioned above, and TCFD.

In fact, as a signatory to America is All In, our director, ESG Research, and director, Corporate Sustainability, participated in the initiative’s Hill Day on Climate Action, speaking with local congressional representatives about the importance of including climate-focused elements into the federal infrastructure bill.

On the operational side, while there are no set targets in the NZAMi for company emissions, it’s expected that firms take this into consideration in their overall goals. Additionally, we’re looking for commitments that are more focused on corporate operations to give us clearer guidance on goal setting.

In the meantime, last year we set a goal for more meaningful and accurate measurement of emissions and we’re making incremental moves in that direction. Particularly in what we typically consider to be one of our highest emitting activities, business travel, we’ve implemented a new managed travel program. This program will give us the ability to track emissions more accurately using data directly from airlines, and estimated emissions from hotel stays and rental cars, which we’ve never measured before. Previously, we collected airline travel emissions through an annual employee survey, which was challenging to estimate for our frequent travelers. This program was officially activated in January 2022, just as our business travel began to increase post COVID restrictions, so our 2022 report will reflect these more accurate measurements.

In addition to travel, we made a change to our waste collection in 2021. We contracted with a vendor to help educate our staff and provide composting services for our Boston office. We’ve posted clear signage around the recycling and composting bins. As with any change in habit, composting and recycling properly takes time to get used to, but several staff members have been engaged to serve as advocates for the initiative. We should be receiving landfill diversion data after a year of service.

While our goal with measurement and environmentally conscious initiatives is to reduce our emissions as much as possible, we find carbon credits to be useful tools to help us recognize and work to offset our impacts. As such, we've connected with a third-party vendor that uses data, artificial intelligence and automation to connect us with high-quality forest projects that we can feel confident in supporting. We've purchased credits to cover all of our measured emissions for 2021. This year, we supported the NIHT Topaiyo REDD+ Project in Papua New Guinea. This area has been the world's largest exporter of tropical timber, making it a key focus for intervention. Funding this project provides landowners and communities an alternative source of income to help avoid the harvesting of the critical rainforests in the region.