For Professional and Institutional Investors
Only– Not to be further circulated.
In Switzerland for Qualified Investors Only.
In Australia, for wholesale clients only.

Climate change –our approach for investments
April 2021

abrdn.com

Contents
Introduction3
Our beliefs

4

Our approach6

Our actions7

1. Research and data

7

2. Investment integration

9

3. Client solutions11

4. Investee engagement and voting12

5. Collaboration and influence

12

6. Disclosure

13

Our structure

15

What’s next

16

Appendix A – Climate change working group18

Appendix B – Climate change associations and initiatives 19

AuthorWho we are

Eva Cairns
Head of Climate Change Strategy

abrdn is a leading global asset manager
dedicated to helping investors around theworld reach their desired investment goals andbroaden their financial horizons. The investment
needs of our clients are at the heart of what
we do. We offer a comprehensive range ofinvestment solutions, as well as the very
highest level of service and support.

Introduction

A warming planet and the energy transition
to a low-carbon economy are changing therisk profile for many of the companies andeconomies in which we invest.
Greenhouse gas emissions hit a record high in 2018,
increasing by 1.7%. This was a result of energy demand
growth, which was primarily met by fossil fuels. At thesame time, we have seen an increase in costly, extreme
weather events, such as storms, wildfires and floods.
The 2018 Intergovernmental Panel on Climate Change(IPCC) special report on 1.5°C warming highlights thedamages we can expect if we don’t take more ambitious
action to reach the goals of the Paris agreement – keeping
warming to well below 2°C.
As emissions continue to increase in many regions, thescale of the challenge is immense and the urgency ofaction is unprecedented.

Climate change – our approach for investments

As investors, we have a critical role to play in financing thetransition to a low-carbon economy, and the adaptation
to climate change impacts through our products andinvestment decisions. The transition will require a large
amount of capital allocation from the private sector, which
provides us with a substantial investment opportunity.
In addition, we have a responsibility to all our clients toconsider how climate change will impact the value of theirinvestments. Assessing the risks and opportunities of climatechange is therefore a core part of our Environmental,
Social or Governance integration approach. Regular
engagement with high-emitting investee companies
is essential in order to obtain a good understanding of
their climate risk exposure, challenge them and promoteindustry best practice in climate-risk management.
We take this seriously and have developed a climatechange approach across six areas of focus. This document
provides transparency on our approach and the actions
we are taking to deliver on our responsibilities as investors.

3

Our beliefs

Our climate-change approach and role as investors are underpinned by four core beliefs.
Climate change is a significant challenge
for society. Stronger global policy action
is necessary to help limit global warming
to well below 2°C, as laid out in the
Paris agreement.

The transition to a low-carbon economy
cannot happen without substantial
capital allocation from the private sector.
This provides investment opportunities for
asset managers to play a critical role insupporting the transition.

Climate policy

Capital allocation

The Paris Agreement states that warming should be
limited to well below 2°C of temperature increases
compared with pre-industrial levels. We are alreadyat 1°C warming and current policies are expected totake us to over 3°C warming world. A radical policy
response will be necessary for global emissions
to peak by 2020 and get onto a trajectory below
2°C warming.

The transition to a low-carbon economy requires alarge amount of capital (estimated at $3 trillion perannum by the International Energy Agency) to financenew power generation, energy efficiency and newtransport infrastructure. This is mostly expected tocome from the private sector.

The 2018 IPCC special report on the implications of
1.5°C warming highlights the additional damages
that 0.5°C of warming will cause to our planet.
This includes increased levels of water stress, sealevel rises and extreme heat. The consequences forpeople, economies and ecosystems will be severe.
The financial implications for many of the assets wemanage are likely to be considerable.
In our view, governments need to strengthen policies
further, send clear carbon-pricing signals and provide
increased incentives for low-carbon solutions to
help minimise these damages. The longer action
is delayed, the higher the cost of mitigation andadaptation will be.

This provides a substantial long-term commercial
opportunity for asset managers to channel capital
flows from clients to projects and businesses that will
drive the transition to a low-carbon economy.
We currently provide capital to support the transition
directly though our private infrastructure investments.
We also provide it indirectly, through investments
in infrastructure funds and provision of equity anddebt capital to companies that provide solutions
for the energy transition. This includes renewableenergy developers, utilities and providers of energy
efficient technology.
To grow our role in supporting the financing of thetransition, we are continuously exploring opportunities.
This includes energy efficiency and energy storage.

Stronger climate-related policies will also help
accelerate private-sector investment for the energy
transition and improve climate-related reporting.

4

Our beliefs in practice

Our beliefs in practice

We have signed the 2018 Global Investor
statement to Governments on Climate
Action and also reflect this belief in ourpolicy advocacy activities.

We offer a range of climate-related solutions
and explore opportunities for allocating
capital to support the energy transition
continuously. This can be achieved throughour direct and indirect investments.

Climate change – our approach for investments

To achieve desired outcomes for our clients,
consideration of climate-change risks
and opportunities is an integral part ofthe investment process.

Corporate engagement is essential toensure investee companies manage
climate-related risks and support a ‘just’energy transition. This is an important partof our role as active investors.

Risks and opportunities

Corporate engagement

When making investment decisions, asset managers
have a duty to consider all factors that may have afinancially material impact on returns. Climate change
is such a key factor.

Regular engagement with high-emitting investee
companies allows us to better understand their
exposure and management of climate changerisks and opportunities. In our actively managed
investments, ownership provides us with a strong
ability to challenge companies where appropriate.
We can also influence corporate behaviour positively
in relation to climate-risk management.

The related physical and transition risks are vast
and are becoming increasingly financially material
for many of our investments. Not only in the obvious
high-emitting sectors, such as energy, utilities
and transportation, but also along the supply
chain, providers of finance and in those reliant on
agricultural outputs and water.
In our view, companies that successfully manage
climate-change risks will perform better in the longterm. It is important that we assess the financial
implications of material climate-change risks
across all asset classes, including our real assets,
and make our portfolios more resilient to climate
risk. Adaptation measures are essential to help limit
damages from the physical impacts of climatechange. This is a particularly important consideration
for the real assets in which we invest, such as realestate and infrastructure.
Comparable climate-related data is necessary toenable effective decision making, and is something
we actively source and incorporate into our process.
We are supportive of the Task Force on Climaterelated Financial Disclosures (TCFD) framework tostrengthen climate reporting globally.

We believe that this is more powerful for an effectiveenergy transition than a generic fossil fuel divestment
approach. Through active engagement we cansteer investee companies towards ambitious targets
and more sustainable low-carbon solutions. If wefind that there is limited progress in response to our
engagement, we will consider the ultimate option of
selling our holdings.
We strongly encourage companies to consider thesocial dimension of the energy transition to ensure it isinclusive and ‘just’. This means worker and community
needs are considered on the path to a low-carbon
economy so they are not left stranded. Other social
aspects, such as affordability and reliability of energy
supply are also important.
Influencing through engagement has worked
particularly well in collaboration with other asset
managers and asset owners as part of ourinvolvement in Climate Action 100+. This is a five-year
initiative to engage and influence high-emitting
companies collaboratively.

Our beliefs in practice

Our beliefs in practice

We provide climate change insights
through research and data to investment
decision makers. This helps assess thefinancial materiality of climate changerisks and opportunities.

We influence management of climaterelated risks through engagement andvoting. We are part of Climate Action
100+ and have signed the 2018 Just
Transition statement.

Climate change – our approach for investments

5

Our approach

As investors, our focus on climate change
provides high-quality data and insights
on climate-change trends, risks andopportunities. This is integrated into ourdecision making, drives positive outcomesfor our clients and supports the transition toa low-carbon economy.

Our Climate-Change Approach for Investments1 is built
around six areas of focus. High-level objectives for eacharea are provided below (Chart 1). Our approach toclimate change is closely aligned with the PRI Investor
Agenda. This is an initiative for investors to demonstrate
their contribution to transitioning the world’s financial
capital to low-carbon opportunities. It encourages
investors to demonstrate action across four areas:
investments, corporate engagement, investor disclosure
and policy advocacy.

Chart 1: abrdn Climate Change Approach
Objective

Aim

Investment Integration

Understand the potential financial impacts of climate-change risks
and opportunities across regions and sectors, integrate these into ourinvestment decisions and understand the implications for our portfolios.

Client Solutions

Understand client needs in relation to climate change and low-carbon
product demand. Develop innovative climate-related client solutions
and products across all asset classes.

Corporate
Engagement

Provide high-quality climate-change insights and thematic researchacross asset classes and regions. This includes using climate-related
data as an input into the investment process.

Investee Engagement& Voting

Better understand investee exposure and management of climatechange risks and opportunities.
Influence investee companies on management of climate change risks
and opportunities via engagement and voting. Highlight expectation to
apply the TCFD framework when reporting on climate-related data.

PolicyAdvocacy

Research & Data

Collaboration& Influence

Collaborate with climate-change-related industry associations andparticipate in relevant initiatives. Engage with peers and policymakers
to drive industry developments and best practice.

Investor
Disclosure

Investments

Focus

Disclosure

Provide relevant
high-quality dataand insights on
climate-change
trends, risks andopportunities
that are fully
integrated into
our decision
making and drive
positive outcomesfor our clients.

Disclose climate-change-related data using the TCFD reporting
framework across the four pillars: governance, strategy,
risk management, metrics and targets.

Alignment with PRI Investor Agenda Note: this approach is focused on our Investments only; our Group operational climate change approach, including our own emissions, is covered in our Group Sustainability report.

1

6

Climate change – our approach for investments

Our actions

Here, we detail the actions that we take todeliver against our objectives across the
six areas of focus for climate change.

The ESG Investment team regularly produces thematic
notes that discuss the implications of ESG trends acrossasset classes. Climate change represents one of our fivethematic research pillars (Chart 3).
Climate-change-related topics we have researchedover recent years include important climate-change
considerations for companies and investors, such as
stranded assets and policy developments. Some of these
topics are incorporated within externally published white
papers, available on our website. In addition, our quarterly
ESG report highlights the ESG-related research andengagement undertaken across abrdn, including regular
articles on climate change.

1. Research and data
Climate-change research – thematic & sector
High-quality research that drives investment decisions
and positive outcomes is a core component of ourinvestment strategy. This includes climate-change
research, which is undertaken by investment analysts
and portfolio managers across asset classes. We also
have a dedicated climate-change analyst within our
ESG Investment Research team. They provide insights on
key regulatory and industry trends across regions andresearch specific climate-related risks and opportunities.
This is done in collaboration with the abrdn ResearchInstitute and our Global Strategy team.

We also publish internal insight notes. For example, on
the outcomes of events such as COP24, climate-focused
deep dives into sectors and guidance for asset managers
on topics such as TCFD. Climate-change research
priorities are guided by the Climate Change Working
Group (see Appendix A). These are driven by industry
developments, regulation and client demand.

Human rights& community

bal Comp
GloaBusiness ethics& governancebal Comp
GloaNbal Comp
Glo
a
ct

N

ct

N

ct

LabourHumanrights

Anticorruption

Working conditions,health & safety,
equal opportunities,
staff retention, training& development, labour
relations, talent retention,collective bargaining

Modern slavery, child labour,
supply chain issues, inequality,
lack of access to resources,
land rights, food & nutrition,
data privacy,
community relations

Anti-bribery & corruption,
audit issues,board balance, board diversity,
remuneration, businessethics, director independence,shareholder rights,
accountability,
cyber security, tax

SectorResearch

TopicsSustainable
Development Goals

EnvironmentU

bal Comp
Glo
a

ct

N

Employment &labour practices

U

ClimatechangeU

Environmental
responsibility

U

ThemesChart 2: Global ESG Investment Research Focus

Water, waste, plastics,
circular economy,
biodiversity,
deforestation,
toxic emissions, pollution

Clean energy,
carbon footprinting,decarbonisation,transition economy,energy efficiency

ESG investment research is aligned with our investment process. As with our investment managers,
ESG investment analysts have sectoral responsibility for the sectors where the ESG risks are closest to their area of thematic expertise.

Climate change – our approach for investments

7

Carbon-data analysis
The availability of reliable and robust climate-related data is critical to enable effective investment decisions.
We currently provide a carbon footprint for a number of our portfolios. We have developed the capability to expand
this and aim to provide carbon-footprinting reports for a wide range of our strategies across asset classes in line with
TCFD requirements.
Carbon footprinting is a good starting point for understanding exposure to climate risks and the impact of acompany or a portfolio on the energy transition. It can help identify relatively carbon-intensive companies and drive
corporate engagement. It can also facilitate decision making to decarbonise a portfolio. Emissions are measured in
CO2e (carbon dioxide equivalent) which measures the impact of the different greenhouse gases in terms of level of
CO2 that would create the equivalent degree of warming.
Our carbon-footprinting analysis is detailed below.
. Total emissions in tonnes of CO2e (apportioned) – to reflect the amount of greenhouse-gas emissions that are‘financed’ by the portfolio. This is ultimately what countries and companies are under pressure to reduce.
. Relative emissions (in relation to revenue or AUM) in tCO2e/USD – to reflect the carbon intensity of the company/
portfolio. This can be compared against a benchmark, other portfolios and peers.
. Attribution analysis – to demonstrate which sectors and companies contribute the most to the portfolio’s

carbon footprint.
. Trend analysis – to reflect how emissions change over time and provide a baseline for comparison. This is important,as high emitters with a positive trend can be supportive of the energy transition.
Carbon footprinting has its shortcomings. It is a backward-looking measure and data comparability across peers
can be a concern. Lack of disclosure can be a challenge, as some smaller and private companies that we invest in do
not disclose emissions data. At portfolio level, we apply a 75% coverage threshold to decide whether data disclosureis good enough for meaningful portfolio carbon-footprint analysis.
The scope of emissions included in analysis is an important consideration. While Scope 1* (direct emission) and
Scope 2 (indirect emissions from consumption of purchased energy) are generally reported on by a company,
Scope 3 emissions (taking account of upstream and downstream emissions along the value chain) are moredifficult to obtain. However, they are critical for understanding the true impact a company has on emission levels.
In fact, in many cases, Scope 3 emissions make up the majority of a company’s total emissions.
Our current approach is to consider Scope 1, 2 and 3 emissions at company and sector level. We limit emissions to
Scope 1 and 2 for portfolio carbon footprinting to avoid double counting and data inconsistencies.
In addition to emissions data, we consider other climate-related indicators for the companies we invest in. This
includes the quality of climate-risk management, climate-change strategies and targets, scenario analysis
outcomes, emission forecasts and potentially avoided emissions by making certain investment choices.
Scenario Analysis:
Scenario analysis is an important topic for us as investors. It is a core part of the TCFD recommendations and it helps
understand the impact of different climate-related scenarios on our investments. We currently undertake scenario
analysis for certain companies and portfolios to assess alignment against a 2°C warming scenario using publicly
available tools. Our aim is to continue to expand the scope of this. We are involved in Institutional Investors Groupon Climate Change (IIGCC) round tables on scenario analysis to engage on best practice with peers and refine
our approach further.

*Scope 1, 2 and 3 emissions are defined by the GHG Protocol, the global standard for measuring emissions.

Around 29,000 trees needed tooffset the portfolio emissions

8

Climate change – our approach for investments

Portfolio carbon-footprinting example – model portfolio
Total emissions reflect the apportioned physical emissions ‘owned’ by the portfolio based on % invested and market cap.

TOTAL EMISSIONS(tC02e)Apportioned Emissions
Scope 1 + 2

Scope 1
(direct)

Scope 2(indirect)

Scope 3(value chain)

Portfolio

5,800

5,300

500

5,200

Benchmark

8,300

7,100

1,200

8,250

Relative to Benchmark

69.8%

75.54%

36.96%

62.96%

Avoided Emissions

2,500

1,800

700

3,050

CARBON INTENSITY(tC02e/USD revenue)

Weighted Average Carbon
Intensity Scope 1 + 2

Scope 1

Scope 2

Scope 3

Portfolio

125

109

16

165

Benchmark

152

118

34

210

Relative Carbon Efficiency

17.86%

7.77%

53.40%

21.35%

Difference to Benchmark

-27

-9

-18

-45

The closer the portfolio carbon efficiency to 100%, the better. A 100% carbon efficient portfolio is one with zero C02 emissions.

2. Investment integration
We assess risks and opportunities in relation to manyenvironmental, social and governance (ESG) factors
as an integral part of our investment process across all
asset classes. This includes understanding the risks andopportunities related to climate change.
The first step is to clearly identify the climate-change risks
and opportunities that a country, sector, company orreal asset is facing and assess their financial materiality.
The TCFD framework provides a useful guide for this(see chart 3).
Transition risks arise due to the transition to a low-carbon
economy. These include higher carbon prices, emissionreducing regulation and shifts in technology and demand.
High-carbon emitting industries and countries are
predominantly affected by these types of risks.
Physical risks arise due to the continued increasein temperatures and extreme weather events. The
negative implications of physical risks include damages
to infrastructure, poor harvests, rising cost of assets andcommodities, migration of climate-change refugees
and operational risks in the supply chain. These canaffect anyone and depend on the regions of operation.
In addition, adaptation costs (e.g., infrastructure required
to protect from physical damages) and the risk of rising
insurance costs must be considered with an increase inphysical risks materialising.
A high-level summary of key climate-change risks by
sector is provided in the table opposite (chart 4). Note:the categorisation into higher- and lower-risk sectors
is only indicative as the whole supply chain needs to beconsidered for a sector.
Climate change – our approach for investments

Opportunities - there is also considerable upside as thetransition to a low-carbon economy provides attractive
capital allocation opportunities. Whether or not weachieve the Paris target of warming below 2°C depends
on whether the world is able to quickly deploy large
amounts of private capital to construct renewable energy
infrastructure, low-carbon transport and to improveenergy efficiency. A move away from coal, as well as rapid
deployment and falling costs of clean energy technologies,
are clearly visible trends. However, a lot more is needed.
It is estimated that $3 trillion investment a year is required
for the energy transition, of which around 60% needs
to happen in emerging markets. As one of the mostexperienced global investors in emerging markets, we
are well positioned for this opportunity.
Examples of specific opportunities to consider forinvestors are:. Construction of renewable-energy infrastructure andupgrading of electricity network. Renewable energy isparticularly capital intensive compared to gas and coal.

. Energy efficiency improvements – particularly in upgrading
existing buildings, constructing new ones and improving
efficiency in industrial processes and transportation.
. Transitioning to low-carbon transport infrastructure,by electrifying vehicles and building the necessary
charging infrastructure; also building better rail andmass-transit systems.

. Use of negative emission technologies, e.g., carbon
capture and storage.
. Access to new markets, assets and public sector incentives.
. Adaptation, such as improving agricultural resilience,
improving flood prevention infrastructure, anddeveloping cooling equipment.
9

Chart 3: TCFD Risks & Opportunities
Transition Risks

Opportunities

Policy and Legal

Resource Efficiency

Technology

Energy Source

MarketRisks

Reputational

Products/Services

Opportunities

Markets

Physical Risks

Resilience

Strategic Planning
Risk Management

Acute
Chronic

Financial Impact

Revenues

IncomeStatement

Expenditures

Cash Flow
Statement

Balance
Sheet

Assets & Liabilities
Capital & Financing

Chart 4
Risk Materiality

Higher

Sectors

Key Climate Change Risks

Mining & Metals
Oil & Gas
Utilities
Heavy Industry
AutosTransportation
Construction
Chemicals
Airlines

Generally high carbon emitters and highly exposed totransition risks, for example:

Financial Implications

a. Regulatory changes, e.g., efficiency standards inbuildings and automobiles

a. Cost of meeting regulatory demands

b. Reduction in fossil-fuel demand, stranded assets,lower fossil fuel pricesc. Higher costs for high-carbon emittersc. Increasing carbon prices
d. Shift in transport choices
e. Decarbonisation activities/technologies
f. Carbon-data disclosure requirements
g. Litigation riskb. Drop in revenue from fossil fuels
d. Revenue drop for fossil-fuelledtransportation, increase for EVs
e. Cost of decarbonisation/new products
f. Cost of data collection and disclosure
g. Cost of legal fines

Also exposed to physical risks and necessary adaptation
activities, materiality depending on location of operations.
Agriculture
Food
Insurance

IT
Financials
Telecoms
Healthcare

Highly exposed to physical risks, for example extreme
weather events & temperatures leading toa. Damaged crops

a. Increased commodity prices

b. Damaged infrastructureb. Cost of repair and insurance payouts

c. Adaptation activities

c. Cost of adaptationd. Increased risk of catastrophic eventsd. Reduced returns in insurance sector

Generally lower carbon emitters, but still required toconsider exposure to transition and physical risks:a. Disrupted infrastructure and operations due tophysical damagea. Cost of infrastructure repair

b. Impact on data centres which are energy andwater intensivec. Lending limitations and failed
repaymentsc. Lending criteria and failure of repayment

Lower

d. Failure of investee companies
e. Increase in decarbonisation activities
f. Carbon-data disclosure requirements

10

b. Cost of energy and water stressd. Reduction in investment valuee. Cost of energy and decarbonisationf. Cost of meeting disclosure demands

Climate change – our approach for investments

3. Client solutions
A number of products enable our clients to transition
away from carbon-intensive industries across public
and private markets.
Our offerings include:. Impact investing focused on companies thatprovide clean energy and energy-efficient products
and services. Screening based on climate-related criteria, such as
power generation and revenue from fossil fuels. Carbon-performance-driven investing. Investment in low-carbon assets, e.g., renewables
and real estate that is highly energy efficient.
Examples across asset classes are detailed below.
CreditWe manage a low-carbon fixed-income portfolio that
focuses on identifying companies that are well positioned
for the energy transition based on a backward andforward-looking view. We also include low-carbon
considerations in our ethical credit portfolio or strategy
and our SRI products.
EquityOur Impact investing solution aims to support the deliveryof measurable, positive environmental and social impact,aligned with the UN sustainable Development Goals(SDGs), while generating strong financial returns. Our
approach is based on identifying impact and allocating
capital across eight pillars aligned with the SDGs.
Companies in the sustainable-energy pillar are thosethat provide positive impact solutions in relation toclean energy, energy efficiency and access to energy.
In addition, our ethical strategy or portfolio screen out
companies that have significant carbon-intensive
operations, such as coal mining.

Real estate
Making all our real estate investments more climate
resilient is a key area of focus within that asset class.
This includes improving energy efficiency and sourcing
renewable energy where possible. We have made a firm
pledge that all the real estate managed by abrdn in the
UK will be powered by 100% renewable electricity by2020 (where we have direct control of energy supplies).
In addition, we will increase the amount of renewableelectricity we procure for real estate investments globally.
Infrastructure
Our infrastructure portfolio or strategy provide financeto build and operate renewable-energy projects,
predominantly in Europe. Many of our multi-asset portfolio
or strategy also invest in infrastructure indirectly throughour own infrastructure portfolio or strategy and external
infrastructure portfolio or strategy.
Strategic asset allocation
Climate change is an important consideration for ourStrategic Asset Allocation (SAA) team. The team advises
clients about the optimal allocation of portfolios across awide range of asset classes including equities, rates, credit,
property and infrastructure. The change in climate policies
and increasing physical impacts of climate change haveaffected the risk and return outlook for a number ofasset classes. This has consequently affected the SAA’s
decision making, for example, improved technology andthe availability of subsidies has dramatically improved
the risk-return profile of renewable energy infrastructure.
We have incorporated this into our analysis and, as a result,
have substantially increased our allocation to renewableenergy infrastructure assets.

“Climate change is at the top of our agenda
in 2019. We have an important role to play insupporting the energy transition through ourcapital-allocation decisions and developing
solutions that meet the changing needs ofour clients.”
Amanda Young,
Global Head of Responsible Investment

Climate change – our approach for investments

11

4. Investee engagement and voting

5. Collaboration and influence

Regular engagement with investee companies isessential to understand management of climate-relatedrisks and opportunities. It allows us to communicate our
expectations to stakeholders.

Industry associations & statements

Specifically, we expect investee companies to:. Apply TCFD recommendations to their climate-data reporting. Identify material risks and opportunities from climatechange and assess their potential financial impact
along the company value chain. Integrate these risks and opportunities into longer-termbusiness planning. Develop climate policies, report on carbon performance,
set targets in line with the Paris Agreement andundertake scenario analysis where relevant. Invest adequately in programmes and technologies
to improve operational efficiency and reducecarbon emissions. Be supportive of public policies that are aligned with
the Paris Agreement goals.
High-carbon emitting companies need to take theserequirements seriously. As large investors, our active
engagement and capital-allocation decisions provide astrong incentive for our investee companies to re-channel
their own investments from carbon-intensive to lowcarbon activities, assets and technologies. If we find that
our engagement efforts are not effective, we will consider
the ultimate option of selling our holdings.
We use company assessment undertaken by theTransition Pathway Initiative’s (TPI) company as part ofour own climate-related engagements. The TPI assesses
companies based on two criteria.
1. Management quality – the quality of companies’
management of their greenhouse-gas emissions
and of risks and opportunities related to the lowcarbon transition.
2. Carbon performance – how companies’ carbon
performance now and in the future might compare to
the international targets and national pledges madeas part of the Paris Agreement.
Increasingly, companies have to face climate-changerelated shareholder resolutions at their annual or
extraordinary general meetings. We have supported anumber of resolutions on climate change and our voting
records are publicly available on our website. Our policy is
to encourage disclosure in line with the TCFD requirements
and to promote the transparency of actions taken to
reduce carbon risk at investee companies.

12

Providing support and actively engaging with a rangeof climate change associations and initiatives helps
progress towards a low-carbon economy. We collaborate
with industry associations on a number of initiatives
to encourage action and transparency of data for thecompanies in which we invest.
We are members of the Institutional Investors Groupon Climate Change (IIGCC), Principles for Responsible
Investment (PRI) and Climate Action 100+. We have also
pledged our support for TCFD, have signed the Global
Investor Statement on Climate Change 2018 and theJust Transition statement.
A full, detailed list is provided in Appendix B.
Policy advocacy
Policy advocacy is important because helping toaccelerate the low-carbon transition through capitalallocation opportunities is reliant on the developmentof government policies to remove barriers and provide
incentives. It is clear that stronger policies would resultin additional costs for certain sectors, but also create
significant opportunities. We believe that a strong
policy response is ultimately inevitable, as pressure on
governments increases with rising temperatures andmore frequent physical impacts.
We engage with policy makers and regulators on
numerous climate-related topics.
. Meeting European Union members of parliament todiscuss the High-Level Expert Group on Sustainable
Finance plan, particularly disclosure requirements for
asset managers.

. Responding to the Financial Conduct Authority
discussion paper on climate change and green finance.
. Participating in the Financial Reporting Council – Climate
Change Lab.
. Taking part in the IIGCC policy programme to influence
climate-related policy developments.

It is our expectation that climate-related reporting
requirements for asset managers will strengthen in linewith the proposals of the EU Sustainable Finance Plan andthe FCA discussion paper on climate change and green
finance. This will help increase transparency, consistency
and quality of data across the industry.

Climate change – our approach for investments

6. Disclosure
In December 2017, we publicly expressed our commitment
to disclosing climate related data in line with the TCFD2.
The central objective of the Task Force’s recommendations
is to encourage organisations to evaluate and disclose thematerial climate-related risks and opportunities that are
most pertinent to their business activities. This is expected
to increase climate-related data transparency and makethe financial system more resilient to climate-related risks.
Working towards reporting in line with TCFD is a joint effort
as it Working towards reporting in line with TCFD is a joint
effort as it requires reporting on two levels.

1. Operational – our climate-change-related activities,
processes and emissions at plc level are reflected in therecommended disclosures made for all sectors. This is
led by our Group Sustainability team and will be coveredin our sustainability report.
2. Investments – focused on the impact of climatechange risks and opportunities on our investments, as
highlighted in the additional disclosure requirements for
asset managers. This is led by the Investments Climate
Change Working Group.

Recommendations and Supporting Recommended Disclosures
Governance

Strategy

Risk management

Metrics and targets

Disclose the organisation’s
governance aroundclimate-related risks
and opportunities.

Disclose the actual andpotential impacts ofclimate-related risks
and opportunities on theorganisation’s businesses,
strategy, and financial
planning where suchinformation is material.

Disclose how theorganisation identifies,
assesses, and manages
climate-related risks.

Disclose the metrics andtargets used to assess
and manage relevant
climate-related risks andopportunities where suchinformation is material.

Recommended Disclosures

Recommended Disclosures

Recommended Disclosures

Recommended Disclosuresa) Describe the board’s
oversight of climaterelated risks andopportunities.

a) Describe the climaterelated risks andopportunities theorganisation has
identified over the short,medium and long term.

a) Describe theorganisation’s processes
for identifying andassessing climaterelated risks.

a) Disclose the metrics usedby the organization toassess climate-relatedrisks and opportunities inline with its strategy andrisk management process.

b) Describe management’s
role in assessing andmanaging climaterelated risks andopportunities.

b) Describe the impact
of climate-relatedrisks and opportunities
on the organisation’s
businesses, strategy
and financial planning.

b) Describe theorganisation’s processes
for managing climaterelated risks.

b) Disclose Scope 1, Scope 2
and, if appropriate,
Scope 3 greenhousegas emissions, and therelated risks.

c) Describe the resilienceof the organisation’s
strategy, taking into
consideration different
climate-related
scenarios, including a
2°C or lower scenario.

c) Describe how processes
for identifying, assessing,and managing
climate-related risks
are integrated into theorganisation’s overallrisk management.

c) Describe thetargets used by theorganisation to manage
climate-related risks
and opportunities
and performanceagainst targets.

 The Taskforce for Climate-related Financial Disclosures (TCFD) was established by the G20 Financial Stability Board (FSB) in 2016 to develop a framework for consistent company
disclosures on the financial implications of climate change risks.

2“abrdn supports the recommendations of the TCFD, as we believe they will contribute to improving
the quality and usefulness of climate change disclosures. As an investor, a systematic assessment
by companies of the impact of climate change on their business model will help us to determine
the nature, scale and management of this factor. As a company ourselves, we will follow therecommendations to demonstrate to markets why climate change analysis is relevant andhow it informs our approach to strategy, governance and risk management.”
Stephen Bird, Chief Executive Officer, abrdn
Climate change – our approach for investments

13

Below is a summary of our progress against each of
the columns.
. Governance – any material climate-change-relatedrisks will be discussed at board level. Senior membersof staff are involved in considering key climate-changerisks and opportunities. This can be done through the
Climate Change Working Group. Such considerations
are also part of investment decision-making for current
strategies and client solutions.
. Strategy – at an operational level, risks and their impacts
are identified and managed in the climate-change risk
register. As an organisation, we are working towards
obtaining a better understanding of the financial
impacts and our resilience with regards to different
scenarios. This includes the impact of different climate
scenarios on our products and investment strategies.
We believe this is an important area of focus.
. Risk management – we have a process for identifying
risks and opportunities for our business. We also have an
in-depth risk register covering each of the requirementsin the TCFD framework. This outlines the likelihood andimpact of risks, as well as timeframe and mitigation
actions. The risks are assessed from an operational
and investment perspective. This is conducted by the
ESG Investment team, working in conjunction withgroup sustainability. Our engagement with investee
companies is supported by a TCFD engagement tool
to encourage better climate-related disclosures.
. Metrics & targets – we publish our own GHG emissions(Scope 1, 2 and 3) and are keen to have clear emission
reduction targets. Due to the recent merger, however,previous targets have to be re-established for a new
baseline. We have published our 2018 emissions
baseline in our sustainability report and are in theprocess of setting appropriate targets for the merged
company. From an investments perspective, we aim
to provide a weighted average carbon intensity for our
products where data coverage is above 75%.

14Climate change – our approach for investments

Our structure

The importance of climate-change
considerations is reflected in our structure.
This provides support to investment
managers and analysts who need toconsider climate change in their daily
investment decision making.
Climate change is a core pillar for our ESG Investment
Research team. This includes a dedicated ESG climatechange specialist who leads on our six areas of focus forclimate change. This is done in collaboration with many
areas across the business.

The abrdn
research institute

The group
sustainability
team

The global
strategy team

Dedicated ESG
climate-change
specialist
Other ESG
specialists within
the wider ESG
investment team

Sectoranalysts andfund managers
across different
regions and asset
classes

Dedicated
ESG analysts
and champions
within our equity
and credit
teams

Climate Change Working GroupIn addition, we created the Climate Change Working
Group for Investments with senior representatives froma wide range of business areas and asset classes. The
goal is to provide direction and validation of our climatechange strategy and action plans. Further details on the
responsibilities of the group is provided in the Group’s
Terms of Reference in Appendix A.
Complementary to our focus in Investments, we have an
Operational Climate Change Working Group. It focuseson our own company emissions and climate actions at
an operational level, including TCFD implementation.
This is led by our Group Sustainability team and further
information is provided in our Group Sustainability report.
Climate change – our approach for investments

15

What’s next?

We are moving things forward across all
six areas of focus. Our current climatechange priorities are detailed below.
1. In-depth research into the financial impact of key risks
and opportunities relevant to specific sectors andregions. Our aim is to clearly demonstrate the impactof certain climate-related risks on the investment case
via examples and case studies.
2. Provide carbon data for our portfolios and investee
companies as standard across asset classes This will
therefore be a core part of our investment decisionmaking process.
3. Continue to engage with investee companies on climaterelated matters, individually and via Climate Action
100+. The goal is to influence the just energy transition
positively and encourage disclosure in line with TCFD
recommendations. Reflect our view through voting andshareholder resolutions in relation to climate change.
4. Reporting in line with TCFD with a particular focus on:a. scenario analysis for our investment products
and strategies
b. providing a weighted average carbon intensity forour strategies or portfolios where data coverage
is sufficient.
5. Capital allocation – Develop a clearer understanding of:a. how abrdn asset allocation currently deploys capitalto support the transitionb. how abrdn and its clients can improve their strategic
asset allocation approach to more effectively support
the climate transition.
6. Develop new climate-related client solutions to meetgrowing client demand.
7. Continuous collaboration – with the climate-related
associations of which we are members. In particular,
the different work programmes of the IIGCC, including
investor practices, corporate engagement andpolicy advocacy.
This document will be updated regularly to demonstrate
the progress and decisions we are making in relation toclimate change.

16

Climate change – our approach for investments

Climate change – our approach for investments

17

Appendix A
Climate change working group
Climate Change Working Group - terms of reference
Objectives
The group consists of cross asset-class representatives
from the business. They all have a common interestin climate change from an investments perspective.
The objective is to provide guidance and direction forclimate-change-related investments matters.
More specifically, the aim is to:. highlight the relevance of climate change on
investments decisions. share and discuss latest industry developments
on climate change. discuss priorities and concerns in relation to climatechange risks and opportunities, focused on different
sectors and asset classes. agree on a strategy and approach for integrating climatechange into our investments decision-making process.
This can then be used for our ESG house view on climatechange and internal and external communications.
Responsibilities. Input – provide relevant climate-change-related input
to represent risks, opportunities and impacts. Understand – the impact of climate change on theinvestment process and raise awareness. Challenge – current state and proposed initiatives to help
create a robust climate change strategy and approach. Future View – provide a view on future developments
and expectations within the business area in relation
to climate change. Prioritisation – provide a view on recommended
initiatives and research to help focus resources. Review and Validate – review and validate internal
climate change related documentation to ensure
they reflect our wider business view
. Outputs – abrdn Climate Change – Our Approach

Format and frequency. The CCWG will meet every six to eight weeks todiscuss climate-change developments, emerging
risks and opportunities, make decisions and agree onprioritisation of next steps. Inputs and supporting documents for the meeting will
be distributed at least one day in advance by the chair. The minutes, decisions and the actions from themeeting will be circulated within three days of themeeting by the chair. The forum will consist of the stakeholders mentioned
below but other key representatives may be invited toattend on an ad-hoc basis as required.
Key roles and stakeholders
The chair of the meeting will be the ESG Investment
Climate Change specialist.
Members from the following business areas
are represented:. Equities. Credit. Emerging market debt
. Real estate. Private equities. Infrastructure. Global equities research. Global strategy. Strategic asset allocation. abrdn research institute. ESG investment team. Group sustainability
Each of the business areas should be represented at
the meeting and delegate appropriately if needed.

for investments: a clear articulation of integration ofclimate change risks and opportunities in the investment
process, products, carbon data usage and disclosure.

18

Climate change – our approach for investments

Appendix B
Climate change associations and initiatives
We support and actively engage with arange of climate change associations andinitiatives to help lead progress towards a
low-carbon economy. Examples include.
. PRI – as signatory of the Principles of Responsible
Investment (PRI), we regularly engage on climaterelated matters. We align ourselves with the Investor
Agenda which was developed for the global investor
community to accelerate and scale up the actions thatare critical to tackling climate change and achieving thegoals of the Paris Agreement.
. IIGCC – we are members of the Institutional Investors
Group on Climate Change (IIGCC). This is a networkof nearly 150 asset managers and owners in Europe.
It takes a pro-active approach to managing climatechange risks and opportunities. The IIGCC also provides
a collaborative platform to encourage public policies,
investment practices and corporate behaviour that
address long-term risks and opportunities associatedwith climate change.
. Paris Pledge for Action – by signing the Paris Pledge for
Action we have demonstrated our support for the vital
goals of the Paris Agreement.
. Taskforce for Climate-related Financial Disclosures(TCFD) – in 2017, we formally expressed our support for
TCFD. We are actively working towards implementing
the TCFD recommendations and encouraging ourinvestee companies to do the same. One key areaof focus is to provide a weighted average of carbon
intensity for our strategies or portfolios.
. Global Investor Statement to Governments on Climate
Change 2018 – we are a signatory of the Global
Investor Statement on Climate Change, which calls forgovernments to take action and strengthen their climate
related policies in order to:– Achieve the Paris Agreement’s goals – update andstrengthen nationally determined contributions
to meet the emissions reduction goal of the Paris
Agreement. The process started in 2018 and will becompleted no later than 2020.

– Accelerate private-sector investment into the low-

carbon transition - Incorporate Paris-aligned climate
scenarios into all relevant policy frameworks andenergy transition pathways. Put a meaningful priceon carbon. Phase out fossil-fuel subsidies by set
deadlines. Phase out thermal coal power worldwide
by set deadlines.

Climate change – our approach for investments

– Commit to improve climate-related financial reporting– Publicly support the TCFD recommendations andthe extension of its term. Commit to implement the
TCFD recommendations in their jurisdictions, nolater than 2020. Request the FSB and international
standard-setting bodies incorporate the TCFD
recommendations into their guidelines and standards.

. Transition Pathway Initiative (TPI) – we are proud to bean early supporter and research funding partner of the
TPI. This assesses companies’ readiness for the transition
to a low-carbon economy and is aligned with therequirements of the TCFD.
. ClimateAction 100+ – as members of this collaborative
initiative between asset managers and asset owners, we
engage with high-carbon emitters, influence disclosureand encourage positive behaviour in relation to climate
risk management and energy transition strategies in linewith TCFD.
. Just Transition Statement – we are a signatory of the2018 Statement of Investor Commitment to support a
Just Transition to a low-carbon economy by integrating
the workforce and social dimension into our climate
practices. We have committed to take action in one ormore of the following:– investment strategy - integrate workplace andcommunity issues into climate-change policies
and investment beliefs, dialogue with stakeholders
and mandates– corporate engagement - include workforce andcommunity issues in climate-related engagementon corporate practices, scenarios and disclosures– capital allocation decisions - design investment

mandates across asset classes that linkdecarbonisation, climate resilience, decent work,
and inclusive growth– policy advocacy and partnerships - support theinclusion of the just transition in regional, national
and international policies, contribute to placebased partnerships– learning and transparency - develop systems toreview and communicate progress. CDP – as signatory of CDP, we have access to its
extensive research and database on climate change,
water and forestry. We also submit our own emissions
data to CDP.
. ShareAction – we regularly engage with ShareAction
to support its activities and provide input onshareholder resolutions.

19This communication constitutes marketing, and is available in the following countries/regions and issued by the respective
abrdn group members detailed below. abrdn group comprises abrdn plc and its subsidiaries:(entities as at 27 September 2021)
United Kingdom (UK)
Aberdeen Asset Managers Limited, registered in Scotland (SC108419) at 10 Queen’s Terrace, Aberdeen, AB10 1XL.
Standard Life Investments Limited registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Bothcompanies are authorised and regulated in the UK by the Financial Conduct Authority.
Europe1, Middle East and Africa
1In EU/EEA for Professional Investors, in Switzerland for Qualified Investors - not authorised for distribution to retailinvestors in these regions

Belgium, Cyprus, Denmark, Finland, France, Gibraltar, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway,
Portugal, Spain, and Sweden: Produced by Aberdeen Asset Managers Limited, registered in Scotland (SC108419) at 10
Queen’s Terrace, Aberdeen, AB10 1XL, and Standard Life Investments Limited registered in Scotland (SC123321) at 1
George Street, Edinburgh EH2 2LL. Both companies are authorised and regulated by the Financial Conduct Authority in
the UK. Unless otherwise indicated, this content refers only to the market views, analysis and investment capabilities ofthe foregoing entities as at the date of publication. Issued by Aberdeen Standard Investments Ireland Limited. Registeredin Republic of Ireland (Company No.621721) at 2-4 Merrion Row, Dublin D02 WP23. Regulated by the Central Bankof Ireland. Austria, Germany: Issued by Aberdeen Asset Managers Limited, registered in Scotland (SC108419) at 10
Queen’s Terrace, Aberdeen, AB10 1XL, and Standard Life Investments Limited registered in Scotland (SC123321) at 1
George Street, Edinburgh EH2 2LL. Both companies are authorised and regulated by the Financial Conduct Authority
in the UK. Switzerland: Aberdeen Standard Investments (Switzerland) AG. Registered in Switzerland (CHE-114.943.983)
at Schweizergasse 14, 8001 Zürich. Abu Dhabi Global Market (“ADGM”): Aberdeen Asset Middle East Limited, 6th floor, Al
Khatem Tower, Abu Dhabi Global Market Square, Al Maryah Island, P.O. Box 764605, Abu Dhabi, United Arab Emirates.
Regulated by the ADGM Financial Services Regulatory Authority. For Professional Clients and Market Counterparties only.
Asia-Pacific
Australia and New Zealand: abrdn Australia Limited ABN 59 002 123 364, AFSL No. 240263. In New Zealand to wholesale
investors only as defined in the Financial Markets Conduct Act 2013 (New Zealand). Hong Kong: abrdn Hong Kong Limited.
This document has not been reviewed by the Securities and Futures Commission. Japan: abrdn Japan Limited Financial
Instruments Firm: Kanto Local Finance Bureau (Kinsho) No.320 Membership: Japan Investment Advisers Association,
The Investment Trusts Association, Type II Financial Instruments Firms Association, Japan Securities Dealers Association.
Malaysia: abrdn Malaysia Sdn Bhd (formerly known as Aberdeen Standard Investments (Malaysia) Sdn Bhd), Company
Number: 200501013266 (690313-D). This document has not been reviewed by the Securities Commission of Malaysia.
Taiwan: Aberdeen Standard Investments Taiwan Limited, which is operated independently, 8F, No.101, Songren Rd., Taipei
City, Taiwan Tel: +886 2 87224500. Thailand: Aberdeen Asset Management (Thailand) Limited. Singapore: AberdeenStandard Investments (Asia) Limited, Registration Number 199105448E.
AmericasBrazil: abrdn is the marketing name in Brazil for Aberdeen do Brasil Gestão de Recursos Ltda. which is an entity duly
registered with the Comissão de Valores Mobiliários (CVM) as an investment manager. Canada: Aberdeen Standard
Investments (“ASI”) is the marketing name in Canada for the following entities, which now operate around theworld under the abrdn brand: Aberdeen Standard Investments (Canada) Limited, Aberdeen Standard Investments
Luxembourg S.A., Standard Life Investments Private Capital Ltd, SL Capital Partners LLP, Standard Life Investments
Limited, Aberdeen Standard Alternative Funds Limited, and Aberdeen Capital Management LLC. Aberdeen Standard
Investments (Canada) Limited, is registered as a Portfolio Manager and Exempt Market Dealer in all provinces andterritories of Canada as well as an Investment Fund Manager in the provinces of Ontario, Quebec, and Newfoundlandand Labrador. United States: abrdn is the marketing name for the following affiliated, registered investment advisers:
Aberdeen Standard Investments Inc., Aberdeen Asset Managers Ltd., abrdn Australia Ltd., Aberdeen Standard
Investments (Asia) Ltd., Aberdeen Capital Management LLC, Aberdeen Standard Investments ETFs Advisors LLC and
Aberdeen Standard Alternative Funds Limited.

For more information visit abrdn.com
GB-170921-157204-5

abrdn.com

STA0322516912-001