BBVA Asset Management announces initial decarbonization targets for its portfolios
As a result of its joining Net Zero Asset Managers in 2021, BBVA Asset Management has announced its initial targets for decarbonization of assets under management. This initial commitment affects equities and bonds in managed portfolios in Spain and Mexico. The scope of the commitment will be widened in coming years. BBVA AM has set intermediate commitments for the year 2030, which include a 50% reduction of carbon emissions of its equity and corporate fixed income assets.
When joining Net Zero Asset Managers, BBVA AM undertook to support its investee companies in reaching their decarbonization goals. Over the past year, the asset management firm analyzed its portfolio to pinpoint the initial target assets within the decarbonization commitment.
BBVA AM then set an initial commitment to decarbonize 22% of its portfolio of assets under management. These assets are part of the portfolios managed in Europe and Mexico and comprise Eurozone sovereign bonds (10% of total assets under management) and equities and corporate bonds (12%). Asset classes for which there is no reliable data or methods are outside the scope of the project for the time being. However, this is just an initial commitment. It will be reviewed in the coming years to widen its scope.
Along with decarbonization of portfolios, BBVA AM is committed to decarbonization of transactions. As part of the BBVA Group, the asset management company is present in seven countries. It uses the bank’s facilities and operates under the same policies and goals in terms of using renewable energy and cutting carbon emissions.
Intermediate commitment for 2030
BBVA Asset Management has also announced an intermediate commitment to decarbonise portfolios under management by 2030, with the following objectives:
- For all the assets included in the initial commitment, reach 60% of assets aligning or aligned with Net Zero.
- 50% reduction in emissions from its equity and corporate fixed income assets, measured through the WACI (Weighted Average Carbon Intensity) indicator, which measures how many tons of CO2 a company generates for every million sales.
- For sovereign fixed income in the euro zone, the goal is to annually improve the CCPI indicator (Climate Change Performance Index), an index that annually monitors climate protection performance by country.
BBVA's asset management area has designed a plan to achieve its decarbonization goals and help reduce emissions in the real economy. The priorities for action are:
- Investing in companies and countries that are on a pathway to transition, with specific targets and action plans.
- Hosting engagement activities so that companies that have not set targets or have no action plans start the transition process.
- Working on action and follow-up plans for companies with higher emissions to support the goal of decarbonization of portfolios.
With the aim of advancing the commitment to widen the coverage of assets within portfolios, the asset management firm also established several lines of action:
- For assets not included in the initial commitment due to limitations on data access or lack of defined methods, the firm will engage in industry forums to move forward with covering more assets.
- BBVA AM has set a policy to exclude businesses related to coal and oil and gas obtained from tar sands and the Arctic. The policy is linked to a percentage of activity above a certain level: 25% for coal and 10% for tar sands and the Arctic.
- The firm will expand its sustainable offering with products that incorporate decarbonization targets aligned with the 'net zero’ strategy.
- Finally, the company will work with its institutional clients to embed decarbonization targets in their mandates.
BBVA AM's membership of Net Zero Asset Managers is part of the Sustainability Plan on which Asset Management area has been working for two years across the entire organization. The plan aims to incorporate sustainability criteria in the investment process for all managed vehicles, and rests on four pillars: commitment, exclusion, integration and impact strategy.
Among other initiatives, BBVA AM has internally developed an ESG rating with its own analysis methodology supported by data from external suppliers, which applies to all assets under management in portfolios. The firm declines to invest in poorly rated instruments. In addition, the firm has worked on expanding the range of sustainable investment solutions to reach more asset classes, investor risk profiles and sustainability preferences.
BBVA Asset Management has signed the UN Principles for Responsible Investment (PRI), which seek to promote the incorporation of sustainable investment into the asset management industry. The company has also joined IIGCC (Institutional Investor Initiative on Climate Change), a platform of investors working to promote investment aligned with climate change goals. Through the platform, companies engage in initiatives toward decarbonization of their activities.