Abrdn : Sustainability and TCFD report

Sustainability and TCFD report 2023

abrdn plc

Our update on our sustainability strategy, actions and performance.

Against a challenging backdrop, we continue to work to deliver our purpose to enable our clients to be better investors.

Our reporting suite

This report forms part of our reporting suite.

Annual report and accounts

Includes our strategic report, financial highlights and consolidated accounts.

Stewardship report

Sets out our application of the 12 principles of the UK Stewardship Code as investors.

Modern slavery statement

Our disclosure in line with the UK Modern Slavery Act, detailing our work to mitigate related risks.

r Selected information subject to Independent Limited Assurance in accordance with ISAE(UK)3000 and ISAE3410 by KPMG. Assurance statement included on pages 107-109 of this report.

The purpose of this report is to provide 2023 sustainability-related disclosure for abrdn plc. There is particular emphasis on climate-related matters, diversity, equity, and inclusion, and other common areas of focus for our industry.

This document is published on our website. Access to the website is available outside the UK, where common practice may be different.

abrdn is subject to mandatory sustainability disclosure requirements in the UK and other jurisdictions, alongside increasing stakeholder expectations relating to voluntary, or emergent, disclosure standards.

This report provides additional information to the non- financial disclosures provided in our Annual report and accounts. In particular, to requirements relating to the Task Force on Climate-Related Financial Disclosures (TCFD), as required by FCA LR 9.8.6R (8). We believe this reflects the expectation of our stakeholders and reflects common market practice. The information should, however, be read in conjunction with our reporting suite and not as the primary mechanism to meet a specific disclosure obligation.

The disclosure landscape for sustainability-related information has yet to settle and we expect that the nature of this report will evolve over time.

The information in this document should not be taken as applicable to a particular product or investment strategy, and rather as indicative of our wider approach as abrdn plc.

01 Contents

Contents

02 Introduction

07 Community impact

Chief Executive Officer's review 6

03 Materiality

Approach and methodology 9

Our material sustainability topics 10

04 Environment

2023 in review 12

Climate: TCFD overview 13

Climate: Governance 14

Climate: Strategy 16

Climate: Risks and opportunities 19

Climate: Scenario analysis 22

Climate: Risk management 27

Climate: Metrics and targets 35

Nature 45

05 Social

2023 in review 50

Our commitments 51

Diversity, equity, and inclusion 53

Talent 60

Learning and development 63

Inclusive work 65

Inclusion in our value chain 67

Health and safety 70

Human rights 71

06 Governance

2023 in review 73

Sustainability governance 74

Financial crime 76

Responsible tax 78

Cyber and information security 79

Data privacy 81

Procurement 83

Public affairs 86

Responsible communication 87

Delivering good outcomes 88

Compliance training 89

Ethical conduct 90

Contribution 92

Strategy 93

Impact 94

Powerful partnerships 95

Volunteering 97

08 Appendix

Environment metrics 99

Social metrics 101

Governance: SASB 104

External ratings 105

Sustainability commitments 106

Independent assurance 107

Forward looking statements 110

At a glance

abrdn is a modern investment company that helps clients and customers plan, save and invest for the future

Specialist asset managementUK savings and wealth platformsInvestments

Adviser

interactive investor (ii)

Our capabilities in our Investments business are built on the strength of our insight - generated from wide-ranging research, worldwide investment expertise and local market knowledge.

Our Adviser business, the UK's second Powered by the UK's second-largest

largest advised platform by AUA, provides financial planning solutions and technology for UK financial advisers which enables them to create value for their businesses and their clients.

direct-to-consumer investment platform, our interactive investor business enables individuals in the UK to plan, save and invest in the way that works for them.

Our clients:

• - Insurance companies

• - Sovereign wealth funds

  Our clients: - Financial advisers - Discretionary fund managers

  Our clients: - Individuals

  Adjusted operating profit

• - Independent wealth managers

• - Pension funds

  Adjusted operating profit

  £114m

• - Platforms

  £118m

• - Banks

  AUMA

• - Family offices

AUMA

£66.0bn

Adjusted operating profit

£73.5bn

£50m

Cost/income ratio

Cost/income ratio

60%

AUM

47%

£366.7bn

Cost/income ratio

94%

Our purpose

To enable our clients to be better investors

What sets us apart

A diversified business supporting clients at all financial stages

Shaped by our cultural commitments

We put the client first

We are empoweredWe are ambitiousWe are transparent

02 Introduction

Chief Executive Officer's review

When we set our strategy to reshape the business back in 2021, not many would have foreseen the level of global economic and geopolitical turmoil we have experienced since. During this time, we have reshaped our business; moving away from a traditional asset management model to build a stronger abrdn with more ways to win.

We always look ahead as investors and we have identified a number of megatrends that are set to shape the global economy and our investment approach: growth in emerging markets, urbanisation and infrastructure development, climate change and the energy transition, and health and biotech. We also have the platforms to better enable the democratisation of finance in the UK savings and wealth market. However, alongside these opportunities our society is also facing a range of potentially critical issues. Most notably, the world is not on track to deliver on its climate commitments. Additionally, there remains tremendous global inequality, and a retirement income crisis is brewing for millions in the coming decades. We cannot solve these challenges at abrdn alone, but we can absolutely play our part in mitigating them. We will do this by delivering on our purpose - enabling our clients and customers to be better investors. The pace of economic, political, and technological change is relentless and will undoubtedly create challenges as well as opportunities, but we are deeply committed to our clients and have a huge will to create sustainable value together.

Taking stock on climate

The first UN Global Stock Take, and the outcomes of COP28, emphasised again that the world is not on track to meet the objectives of the Paris Agreement. We were on the ground in Dubai and see reasons for optimism but taking stock is not enough. We need decisive action from policymakers in the form of the right incentives to enable the energy transition. We are on track for our own climate commitments and sustainable investing continues to be a strategic area of focus for abrdn. Nonetheless, there are real challenges ahead and we cannot address them alone.

We plan to publish our first Climate Transition Plan in 2024 as the foundation for the next phase of our approach. We see this as the summation of our first phase of work on climate, with much more to come as we look ahead to our target dates and beyond.

Transformation with our colleagues

We are focused on building a culture where our colleagues can thrive, develop their careers and be themselves at work. In 2023 we made some hard choices to create a stronger and more resilient abrdn. We have made great strides in embedding our culture commitments (pages 51-52), which we set out to redefine in 2022. We have targets to increase representation across our business, supported by action plans for gender, ethnicity, and social mobility. In 2023 we recorded a sixth successive year of UK gender pay gap reductions, and despite challenges faced, a slight uptick in overall colleague engagement. Neither of these measures are where we need them to be but conditions for success are in place. It has not been an easy year for many of us, but we remain unequivocally committed to our colleagues and creating a business that we can all be proud of.

Supporting tomorrow's generation

Individuals are increasingly having to take greater responsibility for their own financial futures, but ii's Great

British Retirement survey found only 16% of respondents stating that they had received a financial education. This is a staggering gap and is something we are determined to play our part in countering. We do this through charitable partnerships with organisations such as MyBnk, supporting the delivery of financial education programmes to young people. Looking ahead, you can also expect us to become more vocal on the urgent need to foster a culture of saving and investing in the UK.

The next phase of our progress

In 2023 we reaffirmed our commitment to the principles of the UN Global Compact and the Sustainable Development Goals, with our 10-year anniversary as signatories. This was a timely reminder that sustainability is not a box to be ticked, it is a way of thinking and doing. We have been taking it seriously for a long time, but we have also been subject to our fair share of scrutiny. We accept this, and acknowledge that we must continue to challenge ourselves, as well as our key stakeholders. We are determined to play our part in creating sustainable value, with transparency underpinning our actions. We remain strong advocates for quality disclosure, which we aim to put into practice in this report.

Stephen Bird

Chief Executive Officer

Sustainability overview

Supporting our clients, our people, and a credible transition toward a better world.

Our focus:

Investments

Our communities

41%

£2.1m

In-scope public market portfolio carbon intensity reduction versus 2019 baseline (2022: 27%)

Contribution to charitable causes (2022: £2.4m)

Our conduct

25%

99%

In-scope real-estate portfolio carbon intensity reduction versus 2019 baseline (2021: 7% increase)Mandatory training completed (2022: 99%)

External ratingOperations

AA

69%

MSCI ESG Rating (2022: AAA)Operational emissions reduction versus 2018 baseline (2022: 70%)

Our people

54%

Employee engagement level (2022: 50%)

43%

Female representation across global workforce (2022: 43%)

Materiality:

Approach and assessment

Disclosure approach

This section provides an overview of our identified material sustainability topics as abrdn plc. We perform periodic materiality assessments to inform our sustainability approach and strategy, with outputs intended to illustrate the expected likelihood and significance of potential impacts from sustainability topics. Our most recent assessment was completed in early 2023 and originally published in our 2022 Sustainability and TCFD report. The inclusion of the assessment in this report is intended to frame and contextualise the disclosure that follows, but we have not meaningfully altered our conclusions in the interim period, and this should not be interpreted as a distinct assessment.

Approach and methodology 9

Our material sustainability topics 10

Assessment process

What is a double materiality assessment?

Sustainability materiality assessments consider the relative significance of topics to a business. Topics are assessed in view of potentials impacts, risks, and opportunities, with either financial applicability to the business, or outward potential for impact on the economy, people, and the environment.

Materiality assessments consider stakeholder perspectives on the activities and relationships of a business, within the bespoke context of its industry and operating environment. These inputs are then assessed to inform the prioritisation of sustainability topics and strategies, with outputs often presented with an illustrative matrix.

The value of a double materiality assessment is that it considers both financial materiality and impact materiality, with assessed impacts, risks, and opportunities not limited to those with objective ties to financial performance.

Understanding our approach

Following a transparent process

There is no widely accepted standard for double materiality assessments. The concept is now recognised in regulation but is yet to be fully cemented in practice. We accept that our approach will likely need to evolve in the long term and choose to disclose our approach and methodology to provide transparency on the steps we followed.

Limitations to the assessment

One of the primary challenges of double materiality assessments is that quality inputs are required from a variety of stakeholders to shape a credible output. We made efforts to capture key stakeholder views but the voluntary nature of engagement, and resource constraints, are limiting factors. As we perform similar exercises in future, we will carry forward key learnings to refine our approach over time.

Illustrating our assessment process

Phases and milestones to enable our double materiality assessment:

00

01

02

03

04

To support our assessment, we worked with an independent consultant to limit potential bias and provide a view of best practice.

Decision to perform double materiality assessment to help prepare for future regulatory requirements.

Desk research to reflect on industry and regulatory context and to develop a universe of potential issues.

Internal interviews with senior leaders and subject-matter experts.

Analysis of survey and interview results.

Mapping exercise of stakeholder groups to engage in the process.

Creation of a shortlist of thematic topics and business enablers, as the basis for the assessment.

External interviews from client, investor and NGO perspectives.

Application of weightings for research and stakeholder input.

Validation of shortlist by internal subject-matter experts.

Survey open to colleagues, key third party suppliers, and trade association contacts.

Scoring of inputs to determine financial and impact materiality of topics.

Leverage other applicable materials to broaden analysis.

Output and insight from the assessment developed and documented.

Internal validation with subject-matter experts and senior leaders.

Our material sustainability topics

Our latest assessment

Background to our double materiality review

We completed our double materiality assessment in early 2023 and this reflects our understanding of material sustainability topics for our business. Our belief is that considering both financial materiality and impact materiality is important as global investors, as we consider the ability of topics to alter the enterprise value of a business, or influence investment decision-making, alongside the wider potential for impacts on the economy, environment, and communities. Our previous sustainability materiality assessment was conducted in 2019 with the intervening period subject to radical global changes and transformation for our business. In relative terms, 2023 has been a year of stability, and our view of material sustainability topics for our business remains consistent with the outputs from our latest materiality assessment.

Areas of focus

We have used the outputs of our materiality review to refine our corporate sustainability strategy. This report includes disclosure relating to all our material areas of focus, and signposts to our wider reporting suite where additional information can be found. Our impacts, risks, and opportunities manifest differently across our value chain due to the nature of our business as global investors. This assessment should therefore not be interpreted as a static, or absolute view, rather as basis of how we prioritise sustainability topics as components of our strategy.

Understanding the output and priority level

All topics are material and will be important components of our evolving sustainability strategy. We have grouped the topics across three priority levels to illustrate areas of focus.

Level 1

Topics considered to pose the greatest relevance to our ability to create value and/or reflect highest outward impacts on society and the environment.

Level 2

Topics considered very significant and requiring active management as components of our sustainability strategy.

Level 3

Topics considered important but with relatively less significance, versus other identified topics.

Level 1

Climate change

Ethical conduct and financial practices

Human and labour rights

Cyber security and data privacy

Level 2

Diversity, equity, and inclusion

Financial inclusion and access to servicesCommunity support and developmentBiodiversity and natural capital

Education, opportunity, and talent development

Level 3

Health, safety, and well-being Waste, consumption, and circularity

Topic of emerging importance versus previous assessment.

Topic identified as of high importance to stakeholders.

Note that we have simplified the visualisation of material topics versus disclosure in our 2022 Sustainability and TCFD report. This does not reflect a change to basis of our materiality assessment but is intended to improve accessibility and interpretation. The original disclosure remains available in the previous report, which is on our website. Note also a correction on 04 March 2024 to address a visual error, with the two topics under Level 3 no longer highlighted as topics of emerging importance, versus the original publication on 27 February 2024. No change to the underlying assessment.

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