In December 2015, at the 21st Conference of the Parties (COP 21) in Paris, 197 countries agreed on a global framework for protecting the world’s climate. The Paris Climate Agreement has three main objectives:

▪ Limiting global warming to “well below” two degrees Celsius compared to pre-industrial levels, while striving to limit it to 1.5 degrees Celsius

▪ Reducing global greenhouse gas emissions and strengthening resilience to the impacts of climate change

▪ Allocating financial resources in line with climate protection goals

To achieve these goals, greenhouse gas neutrality is to be attained by 2050 . To this end, countries set their own national climate action contributions. Progress will be reviewed every five years (starting in 2018), and beginning in 2025, climate action targets must also be increased every five years. To this end, all countries were required to submit a long-term strategy for sustainable transformation by 2020.

As a sustainable asset manager, we are committed to the Paris Agreement and aim to contribute to the transition to a sustainable future.

With this in mind, we apply strict exclusion criteria for energy companies and utilities in the EB-Responsible Filter:

Companies that derive 5% or more of their revenue from coal mining or coal-fired power generation are excluded. Companies that derive 5% or more of their revenue from unconventional, controversial methods* of oil and gas extraction are not eligible for investment. In addition, companies whose products or production processes—combined with below-average sustainability—have a particularly negative impact on at least one of the United Nations’ climate-related Sustainable Development Goals ( SDGs) are excluded.

Extraction and Power Generation from Fossil Fuels

*Oil sands, oil shale, shale gas, shale oil, coalbed methane, coalbed gas, Arctic oil and gas production
**Limiting global temperature rise to well below 2°C compared to pre-industrial levels, with efforts to limit it to 1.5°C

Under the EB-SIM Fossil Fuel Policy, companies that generate 5% or more of their revenue from the extraction or power generation of conventional oil and gas must have a credible decarbonization strategy.** A decarbonization strategy is considered credible if, according to NZIF 2.0 , a company is at least “Committed”—meaning it has set at least one long-term net-zero target by 2050 or has an ITR below 2.

To assess the credibility and level of ambition of a decarbonization strategy, we use the Net Zero Investment Framework 2.0 (NZIF 2.0) from the Paris Aligned Investment Initiative (PAII) as well as MSCI’s Implied Temperature Rise (ITR):

The NZIF 2.0 is a practical guide designed to support the development of net-zero strategies and the alignment of portfolios with this goal. The NZIF was developed in 2021 and released in its updated Version 2.0 in 2024. It enables the assessment of decarbonization progress across a wide range of asset classes, such as infrastructure and real estate investments, government bonds, and private equity. Assessing companies’ progress toward climate neutrality is a core element of the framework. Companies are classified into five categories, ranging from “Not Aligning ” to “Achieving Net Zero.” The assessment is multi-stage and is based, among other factors, on current emissions performance, the level of ambition of a net-zero target, whether the net-zero target is science-based, and whether current emissions are transparently disclosed. As a result, the assessment under NZIF 2.0 is forward-looking and, in addition to the status quo, primarily evaluates the credibility and progress of a company’s transformation strategy.

The MSCI ITR compares a company’s current and projected emissions with the remaining global emissions budget, which must not be exceeded in order to achieve the goals of the Paris Agreement. The analysis covers a time horizon through 2050; companies may stay within or exceed their available budget. The ITR provides a specific temperature value in degrees Celsius. If a company does not exceed its available budget, it is on a path to limiting global warming to 1.5°C. If the budget is exceeded, this is reflected in a rising ITR. The assessment using the ITR is therefore also a forward-looking metric.