Active
ownership

Active Ownership

Effective and responsible active ownership remains a cornerstone of our investment philosophy. Through persistent, constructive dialogue with portfolio companies, we aim to preserve and enhance long-term value for our clients while accelerating the transition to a low-carbon economy.

Climate Transition Engagement Programme

Launched in 2022, the Climate Transition Engagement Programme (CTEP) was designed to drive climate action across all companies held within our Global Climate Credit and Equity Strategies. The programme focused on two clear asks:

Setting near-term science-based targets (SBTs) validated by the Science-Based Targets initiative (SBTi), aligned with a 1.5°C pathway.
Annual public disclosure through the CDP Climate Change questionnaire.

Over the past three years, CTEP has evolved into a powerful tool for influencing corporate climate behaviour, generating insights, and informing investment decisions.

Watch our video interview with Luisa Jobson, Sustainable Investing Analyst at Aviva Investors

Monitoring progress

We assess company alignment with our climate expectations through an annual qualitative review, evaluating how closely each firm aligns with our engagement asks. This assessment is complemented by a bonus-malus overlay, which captures our broader views on sustainability performance and engagement culture. The combined outcome of these two steps informs a final rating, categorising companies from Level 1 (most aligned with our expectations) to Level 5 (least aligned). These ratings are relative within our portfolio and are not benchmarked against external indices such as the MSCI ACWI.

This distinction is important as all portfolio holdings have already met a high threshold through our thematic risk model, solutions framework and deep-dive analysis. The Level ratings therefore help us differentiate between companies that are already performing well, highlighting relative leaders and laggards.

This structured approach enables us to track progress, refine our engagement strategies, and support continuous improvement across the portfolio.

Escalation and impact

Our escalation approach matured in 2024. Recognising sectoral limitations, we no longer escalate solely for lack of SBTs where no sector-specific guidance exists. Instead, we focus on broader indicators of ambition and progress.

Escalation decisions are now made in collaboration across the Sustainable Outcomes Strategy range, ensuring consistency and shared accountability. In cases where engagement failed to yield progress, we take steps to reduce exposure or divest, reinforcing our commitment to climate integrity.

Engagement progress in 2024

In 2024, the CTEP continued to build momentum, with a notable increase in both the depth and breadth of our engagements.

	GCE Engagement Programme	Total Aviva Investor Engagements
Number of engagements	20	1166
Percent of substantive engagements Substantive engagement is an engagement typically involving active, in-depth, bespoke dialogue with the corporate.	100%	79.1%
Number of engagement outcomes	23	190

Engagement Outcome Highlights

2

companies committed targets to the SBTi

8

companies had targets validated by the SBTi

13

companies improved on CDP Climate Disclosures

Progress since Inception

Since the launch of the CTEP in 2022, we have seen a marked evolution in climate alignment across our portfolio. Initially, a significant proportion of holdings were positioned in the lower tiers of our proprietary alignment scale, reflecting limited disclosure, nascent target-setting, and early-stage transition planning. By 2024, however, we recorded a 30% increase in companies achieving Level 1 alignment - a status reserved for those demonstrating full alignment with our climate expectations and exhibiting best-in-class practices.

This transformation reflects the strength of our engagement strategy, the rigour of our investment process, and the growing maturity of climate transition planning across sectors. Our portfolio is increasingly composed of companies either aligned or actively progressing toward alignment - a strong signal of positive momentum.

Overall alignment scores show significant progress from the beginning to end of the programme:

Science-Based Targets (SBTi) Progress

The adoption of science-based targets has been a central pillar of our engagement efforts. At inception, 69% of companies had committed to or validated targets aligned with a 1.5°C pathway. Today, the majority of our holdings have either validated targets or are actively working toward them. Notably, in 2024 alone, 8 companies had their targets validated by the SBTi, while 2 additional firms made formal commitments, resulting in 81% coverage of companies with either committed or validated science based targets.

As of 2024, only 2% of companies remain in Level 5, representing the lowest level of alignment. This figure corresponds to a single holding – Veralto, a recent spin-off from Danaher that entered the strategy as a solution-aligned name. Encouragingly, Veralto has since committed to setting a science-based target, demonstrating the momentum behind climate ambition even among newer entrants to the portfolio.

From an SBT perspective, there has been notable progress in the number of level 1 aligned companies:

CDP Climate Disclosure Progress

Annual climate-related disclosure through CDP has also improved significantly. By 2024, we saw a 9% increase in companies scoring level 1 alignment and 88% of holdings now participate in CDP’s Climate Change questionnaire, enhancing transparency and enabling more robust climate risk assessments.

However, we are beginning to observe a divergence in disclosure trends, particularly among large U.S. corporates. Microsoft’s recent decision to cease CDP participation is emblematic of broader challenges in sustaining disclosure momentum amid shifting political and regulatory landscapes. This trend reinforces the importance of persistent engagement and the need to advocate for consistent, high-quality climate reporting.

CDP alignment has seen positive progress over the last 3 years:

Overall Alignment Trends

Across all metrics - alignment ratings, SBTi progress, and CDP disclosure - the trajectory has been positive. Our portfolio is increasingly composed of companies that are either fully aligned or actively progressing toward alignment. This reflects not only the impact of our engagement efforts but also the broader evolution of corporate climate strategies.

Case Studies

RELX – Driving Change Through Escalation

Why RELX?
RELX, a global information and analytics company, supports clients across sectors with tools that enable better decision-making – including on climate. With a strong CDP disclosure record (B–A since 2010) and downstream climate solutions, RELX was a natural fit
for this Climate Strategy at launch.

Driving Change
Despite its transparency, RELX had not committed to a science-based target, creating a gap between disclosure and ambition. Recognising this, we initiated a structured engagement process
in early 2023, consisting of three rounds of dialogue, focused on aligning RELX’s climate commitments with the 1.5°C pathway.

When progress stalled, we escalated the issue at the AGM, leveraging our shareholder voice to signal the urgency
of alignment. In early 2024, we followed up reiterating our asks.
By Q2, RELX had secured a validated near-term SBT – a clear signal of its evolving climate ambition.

Engagement Outcome
This case illustrates how persistent, informed engagement can support meaningful change. RELX’s shift from partial to full alignment demonstrates how escalation, when timed
and executed effectively, can unlock commitments that might otherwise remain out of reach. More broadly, it reinforces
the value of active ownership in accelerating corporate climate action – especially in sectors where climate is not the core business but increasingly material.

Case Studies

Lonza - Engagement Insights from a Hard-to-Abate Sector
Why Lonza? Lonza is a leading pharmaceutical manufacturer, playing a vital role in global health. Its operations are essential regardless of climate change, yet the company faces significant climate-related challenges. With high carbon exposures both operationally - through manufacturing - and upstream in its value chain, Lonza represents a critical opportunity to drive change in a hard-to-abate sector.
Engagement Summary Engagement with Lonza began in 2022 through CDP’s SBTi initiative, targeting climate-material holdings for science-based target adoption. Lonza entered our engagement programme in early 2024 due to being added in the fund. In Q2, the company announced a validated near-term science-based target, prompting further dialogue on how it plans to decarbonise its high-emission operations and supply chain. A standout takeaway was Lonza’s role in securing an industry-first renewable power purchase agreement in China, alongside four other pharma firms. This deal will deliver 200 GWh of renewable electricity annually, saving around 120,000 tonnes of CO₂e.	Engagement Outcome This case exemplifies how targeted engagement can drive ambitious climate action in hard to abate sectors. Beyond this, the engagement served as a valuable fact-finding exercise, helping us assess the credibility of Lonza’s decarbonisation strategy. A key learning was the company’s ability to overcome regional challenges, most notably through securing renewable power for facilities in China, demonstrating that meaningful progress is possible even in difficult operating environments.

Case Studies

Microsoft – Rethinking Net-Zero in Big Tech

Why Microsoft?
Microsoft is a global leader in cloud services, with over 40% of its revenue driven by Microsoft Cloud – growing at 20% annually.
By helping customers decarbonise their IT infrastructure, Microsoft plays a pivotal role in enabling sustainable digital transformation. However, the substantial energy demand from the data centres powering this growth places a spotlight on the company’s own carbon footprint and the credibility of its climate commitments.

Engagement Trigger
Microsoft has long been regarded as a climate leader within the tech sector. It has consistently earned an 'A' rating in CDP Climate disclosures, set a 1.5°C-aligned science-based target validated by SBTi, committed to sourcing 100% renewable electricity by 2030,
and pledged to remove all historical operational emissions by 2050. These commitments positioned Microsoft as a benchmark for climate ambition in high-growth industries.

However, in 2024, Microsoft’s net-zero commitment was removed from the SBTi registry, and the company ceased participation in CDP disclosure. These developments raised questions about the durability of its climate strategy and prompted renewed engagement. Our aim was to understand the drivers behind these changes, assess the credibility of Microsoft’s remaining targets, and explore how the company intends to navigate the tension between rapid business expansion and meaningful emissions reductions.

Microsoft – Rethinking Net-Zero in Big Tech

Engagement Takeaways
Our engagement reaffirmed confidence in Microsoft’s operational climate targets, especially its renewable energy and carbon removal commitments. However, Scope 3 emissions remain a challenge. Emissions rose 31% year-on-year, driven by cloud service expansion
and supply chain impacts. Mitigation efforts are in early stages and have yet to deliver measurable reductions. Microsoft has not provided a clear timeline for when these emissions will decline, and transparency around its strategy is limited.

This dialogue deepened our understanding of the structural challenges facing high-growth tech firms. It highlighted the need to distinguish ambition from delivery and reinforced the importance of clear communication and ongoing investor engagement to support credible climate pathways.

Looking Ahead
Microsoft’s case has prompted broader reflection on what net-zero means in the context of exponential growth. It raises important questions about how companies in fast-scaling sectors can balance expansion with emissions reduction, and whether current frameworks adequately capture this tension. As we continue to engage, we’ll focus on encouraging greater transparency, credible Scope 3 strategies, and sector-specific approaches that reflect the realities of digital infrastructure.

This engagement reinforces our commitment to active ownership as a tool not only for driving change, but for deepening understanding.
In sectors where climate ambition is high but delivery is complex, investor engagement plays a critical role in shaping realistic alignment to net-zero pathways.

Challenges Encountered

While the Climate Transition Engagement Programme has driven meaningful progress, it also revealed important challenges that are shaping its next phase.

A key challenge has been the sectoral limitations of existing frameworks. Industries such as Oil & Gas and Chemicals lack SBTi-approved pathways, making it difficult for companies to formally align with our asks – even when genuine decarbonisation efforts are underway. Similarly, the decline in CDP participation, particularly among large U.S. corporates, has underscored the need for more flexible and inclusive approaches to assessing climate transparency.

We have encountered data timing issues, especially with CDP, which disrupted our ability to consistently track and report progress. Additionally, while the bonus/malus overlay has been valuable in capturing engagement quality, it occasionally skewed alignment scores – penalising fully aligned companies and favouring those with lower baseline performance but higher engagement intensity. Our escalation strategy evolved to better reflect sector-specific realities and broader sustainability performance. In some instances, companies were escalated despite facing structural constraints, such as operating in sectors without an approved SBTi pathway, or demonstrating strong progress in other sustainability areas across our Strategy range. These cases highlighted the need for a more coordinated and context-aware approach to escalation, ensuring decisions are both fair and consistent.

To address these challenges, the next phase of the programme will:

Broaden our framework to recognise credible alternatives to SBTi and CDP.
Adopt a more intuitive alignment scale, from “Not Aligned” to “Aligned.”
Introduce reactive and thematic engagement to respond to emerging risks and sector trends.
Enhance cross-strategy collaboration to ensure escalation decisions are consistent and well-informed.

Conclusion and looking ahead

The conclusion of the first phase of the CTEP marks a significant milestone. Over three years, we have seen companies begin to move from ambition to action, with many now setting near-term science-based targets and improving disclosure.

Looking ahead, we are energised by the opportunity to build on this strong foundation. The programme’s evolution will make us more adaptive, insightful, and impactful. By broadening our focus to include post-2030 ambition, recognising credible alternatives for targets and disclosures, and engaging both thematically and reactively, we will be better equipped to guide companies through the complexities of the climate transition.

We remain committed to our dual mandate: delivering strong financial outcomes while ensuring our investments are resilient in a low-carbon, warmer world. As we enter the next phase of the CTEP, we do so with renewed confidence in our approach, a deeper understanding of the challenges ahead, and a clear vision for how we can continue to drive meaningful, measurable change.