RBC Wealth Management has introduced a new reporting feature to analyse the sustainability credentials of client investment portfolios based on a set of 15 sustainability metrics.
The regulatory environment around sustainability reporting continues to evolve and RBC’s ‘Sustainability Profile’ represents an important step forward in their approach to sustainable investing. At present, few other wealth managers offer sustainability reporting of this level of sophistication.
RBC Wealth Management believes that sustainability considerations should be a part of any successful investment strategy because it: (i) protects against future risks; (ii) offers a source of interesting investment opportunities; and (iii) provides benefits to society and the environment.
What are the 15 sustainability metrics?
Environment – how the company uses natural resources
1. Carbon efficiency
2. Scope 3 efficiency
3. Waste efficiency
4. Water efficiency
Governance – how the company is governed
5. Board diversity
6. Executive pay
7. Board independence
Products & services – whether the company’s products & services are aligned or misaligned with the UN SDGs
8. Environmental good
9. Social good
10. Avoiding environmental harm
11. Avoiding social harm
Society – how the company interacts with society
12. Economic development
13. Avoiding water scarcity
15. Tax gap
Why these 15 sustainability metrics?
RBC Wealth Management has selected this set of sustainability metrics for a number of reasons:
- Universal applicability and availability: These 15 data points can be derived for every listed company globally (for example, executive pay) or can be approximated using estimation models where data is missing (for example, scope 3 emissions).
- Alignment to an established framework: These metrics are aligned to a widely recognised baseline; the United Nations Sustainable Development Goals
- Objective measures: These metrics limit the opportunity for subjective judgement since they only include simple, outcome-oriented measures that are expressed in absolute terms – that means no analyst scores or layering of in-house views. This approach allows for maximum objectivity and accountability in the analysis.
- Minimum correlation between metrics: The set of metrics only includes data points that do not meaningfully correlate to other metrics within the set of 15 metrics. In other words, RBC Wealth Management avoids metrics that are highly correlated and seek to ensure that each metric contributes new information to the overall sustainability analysis.
Stephen Metcalf, Head of Sustainable Investing at RBC Wealth Management, comments:
“In all walks of life, consumers want to know the environmental and social impact of the things that they buy and the choices that they make. The same is true with investors, who are often passionate about understanding the sustainability credentials – such as the carbon emissions or gender diversity – of companies within their portfolios.
“All RBC Wealth Management clients in the British Isles now receive a two page ‘Sustainability Profile’ as part of their monthly valuation, based on a broad set of 15 metrics, which assess how the company uses natural resources, whether its products and services are aligned with the UN Sustainable Development Goals, how it is governed and how it interacts with society. We believe these metrics to be far more tangible for clients than a blended ESG score, and that providing this greater level of detail will become increasingly common as data and reporting improve.”