Sustainability Report 2021 04.6 Targets and metrics 01 Introduction Investment portfolio carbon footprint The past two years showed why we believe Both our listed equity and corporate bonds that both absolute and relative indicators are 02 Measuring and portfolio have undergone considerable changes necessary to measure the carbon performance managing sustainability in the two past years, characterized by the of portfolios. Relative indicators are sensitive economic impacts of the COVID-19 pandemic to changes in either direction in both company 03 Strengthening and the first impacts of our portfolio steering valuation and company sales, whereas absolute our foundation towards the climate targets. emissions are sensitive to strategic asset allocation shifts. 04 Climate-related Since 2019, we achieved a reduction of absolute It should also be noted that our current emission financial disclosure emissions of almost 25 percent. This was driven Scope is 1 and 2 and does not consider emissions 04.1 Highlights by four major factors: a COVID-19 effect on in the wider value chain of investees, which can 04.2 Governance emissions, change in company valuation which be significant for many sectors. While data quality 04.3 Strategy impacts the denominator, portfolio changes, for Scope 3 emissions is still low, there is merit 04.4 Strategy resilience, stress-tests and and structural emission reductions of our investee in sector-specific Scope 3 indicators and data climate scenario analysis companies. The latter is the real-economy change to determine if companies and their products 04.5 Risk and opportunity management we are seeking and it contributes significantly are on a pathway consistent with our 1.5°C 04.6 Targets and metrics to the emissions reductions we observed. ambition. We are working to develop these Our absolute carbon footprint may rebound next indicators also as part of our work with the AOA. 05 Our universal principles year to a certain extent, but what is important for We are also calling for harmonized carbon us is that the underlying structural trend is intact disclosure requirements across all three scopes and enables to achieve our target in 2025. of greenhouse gas emissions (see section 04.3.3). Sectorally, considerable shares of our equity and Please note that figures for financial year bond portfolios are invested in manufacturing 2020 have been restated due to a change companies. The absolute emissions of manufacturing in methodology. make up 45 percent of our emissions in both asset classes. Therefore, we also display NACE level 2 sectors for manufacturing to further disaggregate the sector figures. 87