CONTRIBUTORS
Will Baylis
Portfolio Manager, Martin Currie
Executive Summary
As part of the Net Zero Asset Managers Initiative (NZAMI), Martin Currie Australia (MCA) is committed to supporting companies in achieving Net Zero greenhouse gas emissions by 2050 or sooner, aligning with efforts to limit global warming to 1.5 degrees Celsius. Since 2021, we’ve committed our Martin Currie Sustainable Equity and Martin Currie Sustainable Income funds to be managed in-line with NZAMI’s Net Zero goal, aiming for 100% of fund holdings to have verified Science-Based Targets (SBTs) by 2040.
While progress has been steady, achieving Net Zero is a complex process, requiring companies to navigate stringent requirements, evolving technologies, and competing priorities. In this article, we share insights from our recent engagements with ASX-listed companies about SBTs and explore the challenges and opportunities that lie ahead.
Key findings include:
- Based on our proprietary analysis, 11% of S&P/ASX 200 companies by market cap have set a fully verified SBT, and 15% are publicly committed towards achieving one. This means that 73% of the index by market cap still have no firm commitments to achieve SBT verification or are only in the very early stages of taking any climate action.
Exhibit 1: S&P/ASX 200 – SBT status by category
Source: MCA, Macquarie Research; as of 31 October 2024.
SBT category definitions
SBT Set
- Achieving net zero: Emissions performance is at net zero and expected to remain so.
- Aligned to net zero: The company has set an SBT and is on track to meet it.
- Aligning to net zero: The company has set an SBT but is not yet on trajectory to meet it.
Committed
- Committed: The company has publicly committed to setting an SBT.
Other
- Initial Climate Action: The company is making efforts to reduce emissions but is currently not committed to, or may be unable to, reach net zero due to technical, social or economic barriers.
- No Action: The Company has not yet made any meaningful efforts to reduce emissions.
- On a sector-by-sector basis, companies in the real estate, consumer staples, communications and industrials sectors have progressed the most with verification, while healthcare companies are largely committed to the process. Unsurprisingly, utilities, metals & mining, and energy are the laggards.
Exhibit 2: S&P/ASX 200 – SBT status by sector
Source: MCA, Macquarie Research; as of 31 October 2024.
- Many companies are focusing on regulatory compliance on carbon emissions over SBT verification. This year, the Government has established new mandatory Australia Sustainability Reporting Standards for large Australian businesses, which includes climate-related disclosures, with ASIC responsible for administering the reporting requirements under the Corporations Act. With a short implementation timeline, companies have told us that they are focussing their initial efforts on ensuring compliance with the Corporations Act, which doesn’t require external validation. Many are considering revisiting other Net Zero frameworks and benchmarks including SBTi verification in the future.
- Stringent SBTi requirements and the substantial cost of transition are significant barriers.
Our research and analysis results suggest that achieving Net Zero requires a balanced approach — combining ambition with adaptability towards verified and non-verified targets — to encourage broader industry participation and meaningful action.
By engaging with companies transparently and supporting pathways that balance ambition with practicality, MCA remains committed to playing a pivotal role in a more sustainable, low-carbon future.
Important Information
This publication is issued for information purposes only and does not constitute investment or financial product advice. It expresses no views as to the suitability of the services or other matters described in this document as to the individual circumstances, objectives, financial situation, or needs of any recipient. You should assess whether the information is appropriate for you and consider obtaining independent taxation, legal, financial or other professional advice before making an investment decision. Neither Franklin Templeton Australia, nor any other company within the Franklin Templeton group guarantees the performance of any Fund, nor do they provide any guarantee in respect of the repayment of your capital. This does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.
Past performance is not a guide to future returns. The distribution of specific products is restricted in certain jurisdictions, investors should be aware of these restrictions before requesting further specific information. The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, or a guarantee of future results or investment advice.
Please read the relevant Product Disclosure Statements (PDSs) and any associated reference documents before making an investment decision. In accordance with the Design and Distribution Obligations we maintain Target Market Determinations (TMD) for each of our Funds. All documents can be found via www.franklintempleton.com.au or by calling 1800 673 776. Issued by Franklin Templeton Australia Limited (ABN 76 004 835 849, AFSL 240827).
The analysis of Environmental, Social and Governance (ESG) factors forms an important part of the investment process and helps inform investment decisions. The strategies do not necessarily target particular sustainability outcomes.
Risk warnings - Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.
- Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
- This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.
- Smaller companies may be riskier, and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
- The strategy may invest in derivatives (index futures) to obtain, increase or reduce exposure to underlying assets. The use of derivatives may restrict potential gains and may result in greater fluctuations of returns for the portfolio. Certain types of derivatives may become difficult to purchase or sell in such market conditions.
- Income strategy charges are deducted from capital. Because of this, the level of income may be higher but the growth potential of the capital value of the investment may be reduced.
Franklin Templeton Australia Limited as Responsible Entity has appointed Martin Currie Australia as the fund manager for the Martin Currie Sustainable Equity Fund (ARSN 088 668 820, APIR SSB0125AU) and the Martin Currie Sustainable Income Fund (ARSN 618 906 068, APIR SSB4946AU).