Hancock Natural Resource Group (HNRG), a Manulife Investment Management Company, recently released its inaugural climate disclosure report.
The new report highlights the risks and opportunities climate change presents to timber and agriculture investments and how the firm is assessing and managing climate-related impacts. The report is structured according to the recommendations of the Task Force on Climate-related Financial Disclosures.
“We believe the biggest climate-related opportunity within timber and agriculture is carbon removal,” said William Peressini, CEO of HNRG. “Traditionally we have managed timberland and farmland for our investors in order to achieve market-rate returns, while also generating positive environmental and social outcomes. We are now scaling up our capabilities for ‘impact-first investments’ – investments that optimize and prioritize carbon sequestration – which may also provide the best climate change mitigation option for clients.”
As longtime managers of timber and agriculture, HNRG is aware of the impact climate change has on biological assets and is in a position to mitigate its effects.
The new report focuses on climate analysis and expands on what is contained in the Manulife Investment Management sustainable and responsible investing report for the timber and agriculture business. It provides a deeper understanding of its approach to climate-related governance, strategy, risk management, and metrics and targets for these asset classes.
Highlights of the report
- Climate Related Risks and Opportunities: As a thematic investment manager, HNRG identifies areas where social or environmental objectives can offer commercial investment opportunities across timber and agricultural assets. Sustainably managed forests and farms are carbon sinks and are two of the most significant types of natural climate solutions for removing carbon dioxide from the atmosphere. Leveraging this function is a strategic priority for the firm and informs business planning across multiple time horizons. HNRG incorporates the anticipated impacts of climate-related risks and opportunities into its business strategy in five key ways: Economic research, Diversification, High-quality asset management, Value-added services, and Impact-first investments.
- Stewardship principles and portfolio diversification: HNRG’s risk management process for identifying and assessing climate-related risks is grounded in its acquisition due diligence and integrated investment and property management businesses. HNRG conducts comprehensive environmental, biological and social reviews of all targets and requires all reviews to highlight variance from U.S. standards, even when the relevant local standards are less stringent. In addition to investment due diligence, risk is managed though portfolio diversification and property management by HNRG’s forest and farm management teams. HNRG also manages risk through implementation of a uniform set of Stewardship Principles which are developed, reviewed and adhered to on both a regional and global level.
- Performance metrics: The primary metric used by HNRG to measure the success of its climate-related efforts is clients’ risk-adjusted returns. HNRG believes risk-adjusted return provides the most comprehensive measure of success in managing client assets. HNRG also prioritizes and incentivizes climate stewardship. Stewardship performance comprises 20 per cent of annual employee incentive plan compensation, and is based on third-party sustainability certification audits, as well as the integration of ESG considerations into acquisition due diligence.
“The HNRG 2020 Climate Report showcases why it is a business imperative to adapt to and address climate-related impacts,” said Brian Kernohan, head of sustainability, private markets, Manulife and HNRG. “We look forward to continuing the work necessary to obtain or develop information tailored to achieve fuller results in future iterations of climate-related scenario analysis on behalf of our clients to better understand the journey ahead to a lower carbon and more sustainable world.”
Click here to download a complete copy of the 2020 Climate Report.