2020 Climate Report Prepared in alignment with the recommendations of the Task Force on Climate-related Financial Disclosures Contents Message from leadership 3 Introduction 4 Oversight and management of climate matters 5 Sustainable investment vision and leadership 5 Day-to-day climate management and integration 6 Strategy and risk management 7 Fundamental climate research 7 Our collaborative approach to climate integration 9 Driving outcomes through active ownership 11 Engagement in action: Case studies 12 Deriving opportunity from secular climate themes 14 Expanding our sustainable and ESG investment offerings 15 Addressing our operational footprint 16 Approach to environmental sustainability 16 Our carbon-neutral pledge 17 Next steps and closing statement 19 Appendix 1. TCFD disclosure index 20 Appendix 2. Sample strategies’ carbon footprint 21 Appendix 3. 2020 company engagements on climate change 23 Important disclosures 24 About this report 24 April 2021 Message from leadership We believe climate change will profoundly affect society, economies, and capital markets Market participants must develop a greater understanding of climate-related risks and opportunities and start to shift capital toward innovative solutions The investment community has a vital role to play in strengthening society’s response to climate change, and we intend to lead by example Wellington endorsed the Task Force on Climate-related Financial Disclosures (TCFD) framework in 2017 as it aligned with our view of climate change as a systemic risk to long-term financial performance In September of 2018, we began studying the physical risks of climate change through a research collaboration with Woodwell Climate Research Center (Woodwell), a top-rated climate research organization We aim to bridge the gap between climate science and finance, deepening our appreciation of how climate variables including increased heat, drought, wildfires, floods, hurricanes, access to water, and sea-level rise will impact the securities we invest in on behalf of our clients This research led us to pursue additional collaborations and commitments In 2019, in conjunction with the California Public Employees’ Retirement System (CalPERS), we developed a Physical Risks of Climate Change (P-ROCC) framework to enhance engagements and help the companies we invest in improve climate disclosure Our Director of Climate Research joined the Commodity Futures Trading Commission’s (CFTC’s) Climate-Related Market Risk Subcommittee to examine climate-related financial risks and lay the groundwork for further action In 2020, we became a founding member of the Net Zero Asset Managers initiative, targeting net-zero emissions within the investment portfolios we manage for our clients by 2050 or sooner This work has strengthened our conviction that climate science can inform our stewardship approach and enhance the investment decisions we make on behalf of our clients Looking ahead, we are working to deepen our climate research in the areas of adaptation, mitigation, and innovation We also aim to broaden our engagement efforts to encourage companies to set science-based decarbonization targets that may help avoid the worst effects of physical climate change, and partner with clients to achieve net-zero portfolio emissions A lot of work lies ahead as we chart a course toward a low-carbon future We see these efforts as critical to our firm’s mission of driving excellence for our clients to positively impact millions of beneficiaries’ lives Jean Hynes, CFA Wendy Cromwell, CFA Incoming Chief Executive Officer Vice Chair and Director, Sustainable Investment 3 Introduction NET ZERO ASSET Wellington Management is one of the world’s largest MANAGERS INITIATIVE independent investment management firms, serving as a Wellington is proud to be a founding member and signatory trusted adviser to over 2,200 institutional and private clients to the Net Zero Asset Managers initiative (NZAMI) located in more than 60 countries and actively managing This opportunity enables us to demonstrate continued nearly US$1 3 trillion of assets as of 31 December 2020 With leadership on climate issues, deepen engagements with capabilities covering most segments of the global capital portfolio companies, and enhance consultative partnerships markets, our focus is on investment management on behalf with clients Through this initiative, we commit to: of our clients • Partner with asset-owner clients on their decarbonization goals, consistent with the objective of achieving net-zero Wellington’s solutions draw from extensive proprietary research emissions by 2050 or sooner and benefit from a collaborative culture that encourages independent thought and rigorous debate Our ongoing, science- • Set an interim target for the proportion of assets to be led climate-research agenda informs how we evaluate physical managed in line with that goal and transition risks and assess opportunities for growth • Review the internal target at least every five years Through our collaboration with Woodwell, we study the effects • Aim to increase the proportion of assets covered, until of physical climate change on capital markets, translating our 100% are net zero findings into investment data, tools, and insights We believe This commitment is an extension of our research this work allows our investment teams to better assess climate collaboration with Woodwell, and it reflects our belief that exposures across asset classes and geographies by improving the transition to a low-carbon economy is underway and their ability to anticipate physical climate impacts The Climate unlikely to reverse Research Team shares these insights with investors across the firm to ensure investment decisions are informed by how they No single country, industry group, or market participant impact — or are impacted by — climate change Investors share can tackle this challenge alone Collaboration is at the heart these insights in engagements with issuers to raise awareness of of Wellington’s culture, and we embrace the opportunity and build resilience to physical climate risks to partner with our clients and other stakeholders to achieve net-zero emissions Through NZAMI, we will aim We are pleased to share our second climate report, which aligns to define benchmarking criteria, develop methodologies, with the TCFD’s recommendations This report describes our and shape industry standards, contributing at every level data-driven processes for monitoring, evaluating, and managing of the initiative As a member of NZAMI’s Advisory Group, material climate-related risks and opportunities The processes, our Director of Sustainable Investment will help to shape metrics, and output of our climate disclosures will evolve over the initiative and will work with other asset managers time, as more data becomes available This report complements to broaden the signatory group and encourage wider information available in our annual Sustainability Report, adoption As co-lead of the Paris Aligned Investment available on our website Initiative’s Top Down Target Setting subgroup, our climate transition-risk analyst will play an active role in defining best practices for portfolio-level target setting, among other methodology development 4 April 2021 Oversight and management of climate matters At Wellington, sustainable investing (SI) and climate governance Investment Stewardship Committee (ISC): This group sets start at the top, with our CEO and Executive Committee (EC), the strategic direction on stewardship across the firm, with a and extend across all levels of our investment platform and focus on proxy voting, engagement, and exclusions The ISC business operations comprises senior-level and experienced professionals from portfolio management, investment research, relationship management, and legal and enterprise risk The ISC reviews and Sustainable investment vision approves the firm’s proxy voting guidelines and engagement policy annually and provides fiduciary oversight of the firm’s and leadership proxy voting and engagement activity on behalf of clients This Our SI and climate platform are operationalized on six key pillars includes collaborating with the ESG Research Team to evolve our (Figure 1) Together, we share a unified vision to be the premier approach to climate-related resolutions SI partner and thought leadership provider for clients worldwide The ISC supports dialogue and debate on ESG issues, provides Our leadership mobilizes SI efforts and integrates resources via advice to investors on engagement, and reviews and approves committees, as follows: collaborative engagement opportunities Given that exclusions Executive Committee (EC): This committee oversees all may make engagement less effective, this group oversees our aspects of Wellington’s business, approving all firmwide policy Global Exclusions Working Group, identifying opportunities matters and strategic actions The EC chair and the chair of the to help set companies on a path of inclusion We balance Sustainable Investment Leadership Team (SILT) meet quarterly this objective with our clients’ interests in excluding specific to discuss material sustainability topics, including climate risk economic activities from their portfolios Sustainable Investment Leadership Team (SILT): This cross- Global Exclusions Working Group: Reporting to the ISC, this functional1 team sets the strategic direction for SI principles group forms Wellington’s investment exclusion and engagement and champions the credible integration of