At Mubadala, we aim to integrate environmental and climate considerations into our investment processes – sometimes leading and sometimes leveraging the good work of others.
As environmental and climate science and frameworks have evolved, we have leveraged this progress and have incorporated increasingly sophisticated approaches that build on the evolving infrastructure and frameworks.
We continue to have great conviction that integrating climate considerations into our investment decisions is core to successfully fulfilling our mandate of delivering strong financial returns and creating opportunities for future generations.
At Mubadala we believe that the inclusion of climate and ESG principles and considerations into our investment decision-making contributes to a more sustainable future, while unlocking incremental value from our investments by opening up new opportunities and mitigating risks.
Mubadala’s Responsible Investing Unit leads the integration of this effort across the Group.
Climate integration at both the strategic and tactical level is a priority for Mubadala. We have been working for a number of years to gain a deeper understanding of the carbon footprint of our portfolio and the potential effects of climate change on our most impacted portfolio companies.
We began by assessing the footprint of our directly-owned public and private portfolios as well as of our corporate operations. We continue to work diligently to better understand the footprint of our private market funds and alternative asset class portfolios. The underlying data of the vast majority of our private equity funds is not currently available and market standard calculation methodologies for some asset classes are still under development. We are working with our peers and private market asset managers to advance climate data reporting across the marketplace, such as through the One Planet Sovereign Wealth Fund (OPSWF) Network’s Climate Disclosure Guidance.
Our data set and models will be continually improved and refined over time supported by the ongoing evolution and maturation of climate-related standards, frameworks and approaches. Even in areas of the market where data is still immature and evolving we recognize that it is an important starting point for discussion and action on how to effect real change.
At a strategic level, Mubadala has combined the insight we have gained from our models and data with external frameworks such as those provided by the Task Force on Climate-Related Financial Disclosures (TCFD) and others. We have established a methodology to institutionalize a more consistent approach to analyzing climate considerations across new and existing investments, which is being implemented. We use the output of these analyses to help inform discussions on portfolio strategy and asset allocation. Furthermore, we are using this data to inform an ongoing dialogue about driving down the carbon footprint of our portfolio.
At a more tactical level, our efforts are focussed on progressively institutionalizing the consideration of climate and sustainability across the investment lifecycle. We have introduced a tool that can estimate the carbon footprint of a new or existing investment, and provide preliminary insight into the potential impacts of carbon pricing on a company’s operations. When analysing new private direct investments, we also use an internally developed tool to review and assess the sophistication of a company’s approach to environmental, social and governance-related matters and gain insight into their potential materiality to the transaction.
For new investments, a summary of considerations resulting from screening and due diligence is submitted to our investment committees for inclusion in the investment decision-making process. Our ongoing focus to create and roll-out these and other activities across our organization is part of Mubadala’s continuing effort to strengthen the sophistication, agility and consistency of our approach to integrating climate change and other sustainability principles and considerations across our investment lifecycle.
Mubadala believes the TCFD provides a strong and globally accepted framework to support companies in better understanding and explaining how climate-related opportunities and risks may impact their businesses and how to approach climate-related considerations. As an investor, the preparation and disclosure of comprehensive TCFD-based reporting by our portfolio companies improves our visibility of the overall climate positioning of our portfolio and will enable us to make more climate-informed decisions over time as reporting and disclosure improves. In line with this effort, we worked collaboratively with our most carbon-intensive assets, representing a significant majority of our direct public and private 2021 emissions, to carry-out a comprehensive TCFD-based assessment. It is our intention to expand the number of companies covered by this collaborative TCFD-based engagement over time. Mubadala actively encourages all of our portfolio companies to adopt robust TCFD reporting
We collaborate with our peers, partners and portfolio companies to share best practice and improve our own processes. Mubadala’s Responsible Investing Network was established in 2021 with more than forty UAE-based companies taking part and is being expanded to our global portfolio.
Mubadala believes mobilizing capital across the global financial markets is crucial to making accelerated progress towards a net zero future, and that with our peers we have an important role to play in the drive to increase the maturity of how climate integration is operationalized in the real economy.
Tackling climate change is not a one company exercise but rather a communal effort that requires coordinated action.