Our Mission And Principles
Our Mission And Principles
Engaged Tracking represents a new approach to sustainable and ESG investing. We are mission-driven specialists who believe impact investing is most effective when it is simple, transparent and measurable. We believe in creating a clear link between corporate sustainability performance and capital allocation through our indexes. Our mission is to accelerate the transition to a lower carbon, more circular and sustainable economy.
We publicly rank the world’s largest listed companies according to their Scope 1, 2 and 3 greenhouse gas emissions each year. Our public Engaged Tracking (ET) Carbon Rankings reward carbon efficiency and penalise non-disclosure. The rankings provide a data-driven corporate engagement platform to enable investors to track corporate carbon disclosure and performance across their investments in a transparent way.
Each company’s rank position in the ET Carbon Ranking Series informs its weighting in the investable ET Low Carbon Index Series. This is an ‘engaged’ approach to index investing, whereby there is a clear and transparent link between a company’s climate performance and its weighting in the index. ET Low Carbon Indexes include Scope 3 emissions, which typically account for 75% or more of a company’s carbon risk exposure. Including Scope 3 emissions means the full extent of a company’s carbon risk exposure is not overlooked.
We believe that truly sustainable investment are not just about reducing individual portfolio exposure to sustainability risks but also reducing systemic sustainability risks at the same time.
Engaged Tracking investors reduce their own exposure to carbon risk while simultaneously incentivising corporate emissions reduction, since emissions reductions are rewarded with a greater capital allocation via the ET Low Carbon Index Series.
The ‘Engaged Tracking’ concept (originally termed ‘Environmental Tracking’) is the brainchild of the late Michael Gill, who first published Environmental Tracking in 1997. An update to the original book, Environmental Tracking 3.0, was published in 2012 by Sam Gill, Michael’s son.
After working as an analyst and briefly a fund manager in the late 1990s, Michael foresaw that indexes would play an increasingly significant role in how capital is allocated within the financial markets. His vision was to publicly score companies according to their sustainability performance and create investable indexes based on that information. The objective was to create a transparent tool through which investors could reallocate capital to more sustainable companies and drive improved performance.
Michael established the not-for-profit Environmental Investment Organisation (EIO) in 1996 to further develop the concept. In 2010 Sam Gill, his son, became the CEO and began producing the ET Carbon Ranking Series. Since then Engaged Tracking has been supported by family office investors and Climate-KIC, the European Union’s main climate innovation initiative.
The company was initially nurtured at the Imperial College Innovations Incubator, working with Imperial College’s Risk Management Laboratory to validate its models and methodologies. Engaged Tracking is now based in Canary Wharf, London, at the Level39 high growth space.
In March 2017, the company was admitted as a member of the Social Stock Exchange (SSX), the world’s first regulated exchange dedicated to businesses and investors seeking to achieve a positive social and environmental impact through their activities.
Sam Gill, CEO, Engaged Tracking
“The purpose of the ET Carbon Ranking Series and corresponding ET Low Carbon & Fossil Free Index Series is to help investors reduce exposure to carbon-intensive assets without sacrificing returns. At the same time, the Engaged Tracking approach offers a clear means through which investors can accelerate the transition to a low carbon economy. This is achieved by reallocating capital from carbon-intensive companies to carbon-efficient companies, via a transparent rankings-linked indexing approach that is unique to the market.”
Our vision is to create a more sustainable form of capitalism that reduces systemic risks for all
As the share of global capital allocated to index investing continues to grow, the ability for index benchmarks to influence company behaviour and drive emissions reductions across the economy is significant.
Engaged Tracking is integrating additional Environmental, Social and Governance (ESG) metrics into the Engaged Tracking toolkit, aligned with the UN Sustainable Development Goals. The objective is to provide investors with a systematic, sustainable form of corporate stewardship that acts for people, planet and profit.
Engaged Tracking products are guided by clear principles that are intended to ensure their integrity and to maximise sustainable impact.
We prioritise simplicity over complexity
We always prioritise simplicity over complexity.
We aim to make the design and the goals of ET Ranking and Index Series easy to understand.
We make our products and methodologies transparent
We make the data and methodology used in ET Ranking and Index Series transparent and independently verifiable.
We have designed the ET Ranking and Index Series to encourage improved corporate disclosure of sustainability-related data.
We seek to maximise sustainability impact
We have designed the ET Ranking and Index Series methodology to incentivise continuously improving sustainability performance by companies in the rankings and companies in their supply chains.
We take a holistic approach when considering which ESG metrics are material from an impact point of view. For example, in order to be sure that capital is being allocated away from the most carbon-intensive companies, we include Scope 3 (supply chain) emissions. Scope 3 emissions typically account for 75% or more of a company’s carbon footprint.
We focus on achieving sustainable outcomes. For example, incentivising responsible investment in electric vehicles may lead to lower global greenhouse gas emissions (depending on how the electricity is generated). Incentivising lower greenhouse gas emissions reduces the risk of catastrophic climate change. We focus on the latter.
We seek to minimise system-wide sustainability risk
We create indexes that enable investors to combine forces and send a clear signal to companies to lower their emissions and improve reporting in order to be rewarded with a greater weighting in the index. Creating a transparent tool through which investors can incentivise corporate emissions reduction is designed to accelerate the transition to a low carbon economy and reduce the systemic risk of catastrophic climate change.
We value independence and objectivity
We use objective and science-based metrics in the ET Ranking and Index Series.
We focus on metrics that maximise sustainability impact.
We use metrics based on independent, internationally-accepted standards. For example, the ET Carbon Ranking Series are based on the Greenhouse Gas Protocol, the most widely used international accounting standard for greenhouse gas emissions accounting.
We ensure all ranking methodologies we use are reviewed by an independent group of experts who sit on the independent ET Quality Assurance Panel.