Net Zero Commitment

In December 2022, Breckinridge marked the one-year anniversary of signing the Net Zero Asset Managers initiative (NZAM). This decision is consistent with our longstanding commitment to integrating material ESG considerations in our investment process. As with most ESG risks, we believe that climate and transition risks are not adequately assessed or priced into many investments and, that these financially material risks will increase over time. As we wrote here, Breckinridge believes there is a solid investment case for long-term investors to transition portfolio holdings to net zero greenhouse gas (GHG) emissions by 2050, consistent with global ambitions to limit global warming to 1.5 degrees Celsius above pre-industrial levels.

In the year since signing NZAM, we developed our own bottom-up corporate issuer Net Zero alignment assessments and an engagement program to support our NZAM commitments. Our NZAM investment case is defined by the Breckinridge investment team and integrated within a net zero investment framework that is focused on financial materiality.

As part of our commitment, Breckinridge established three net zero targets:

• Portfolio Coverage Target: We commit to attaining a minimum of 90 percent (by market value) of all corporate fixed income assets under management in the achieving, aligned, or aligning categories by 2030.
  
• Portfolio Decarbonization Target: We seek to reduce fair share emissions intensity in net zero aligned portfolios, as requested by clients, by 50 percent by 2030 from our 2019 baseline. The target is inclusive of operational emissions (Scope 1 and 2) at the portfolio level.
• Engagement Threshold Target:  We will engage with at least 70 percent of financed emissions annually starting in 2023, increasing to 90 percent by 2030.

Our Corporate Climate Transition Risk Framework serves as the foundation for our net zero assessments. Our analysts created the framework leveraging the guidance provided in the Implementation Guide published by the Institutional Investors Group on Climate Change (IIGCC). 

Using the framework, our security analysts can assess exposure to climate risks, track emissions reductions, evaluate the climate related goals of companies and their strategies to achieve the goals, and the quality of their climate governance approach.

Firm Operations

On the operational side, while there are no set targets in the NZAM for company emissions, it’s expected that firms take this into consideration in their overall goals.

In 2022, we introduced a managed travel program which gave us the ability to track emissions more accurately using data directly from airlines, and estimated emissions from hotel stays and car rentals. Previously, we collected airline travel emissions through an annual employee survey, which was challenging to estimate for our frequent travelers, but we feel this new approach gives us better insight into this portion of our Scope 3 emissions.

In addition to travel, we completed our first full year of composting in our Boston office, diverting 480 pounds of food waste from landfills. We plan to continue educating our staff and advocating for better waste management practices in our offices.

Through measurement and practicing environmentally conscious behaviors, we strive to reduce emissions as much as possible, but in addition to that process we find carbon offsets to be useful tools to help us recognize and work to counteract our impacts. As such, this year we decided to connect with Native Energy, a Public Benefit Corporation, to fund projects. 

For our Scope 1 and 2 impacts, we funded a renewable energy project called Big Smile Wind Farm at Dempsey Ridge, in Roger Mills and Beckham Counties, Oklahoma. For our measured Scope 3 emissions—including business travel, employee commute (plus remote workspaces), and data centers—we funded a project called From Waste to Fuel: Improving Agriculture and Livelihoods in Mexico. This is a livestock methane emissions avoidance project that provides small-scale and subsistence farmers with cookstoves, biofuel, and organic fertilizer. We chose both for their multitude of environmental, community and biodiversity benefits, which can be found on their project pages linked above. 

Calculations made through EPA GHG Equivalencies Calculator.

Note: We previously overcalculated our office electricity usage by counting the entire floor kWh usage of our Boston office versus our pro-rata leased share of 56.92% of the floor. Our 2022 figure appears smaller due to this correction rather than planned emissions reductions. As a positive, we did purchase offsets for the larger calculation.

Disclosures:
GRI: 2-4, 3-3 Emissions, 305-1, 305-2, 305-3, 305-5
TCFD: Metrics & Targets A, B, C