For over fifty years, Boston Trust Walden’s success has been defined by our disciplined commitment to Principled Investing. As an independent, employee-owned investment management firm, we seek to invest client assets in enterprises with strong financial underpinnings, sustainable business models, prudent management practices, and a governance structure that supports these objectives. Ultimately, we strive to uphold our fiduciary duty by investing in a set of securities well-situated to produce attractive risk-adjusted returns over a long-term investment horizon. We view ESG analysis — including the evaluation of climate-related risks and opportunities — as part of our mandate to ensure client assets are invested in securities that we believe are well-positioned to minimize risk and produce sustainable returns over full market cycles.
The global scientific community agrees that the Earth’s climate is warming at an unprecedented rate, with the impacts presenting extraordinary and dynamic risks to the economy, communities, and natural systems. For example, rising surface temperatures are leading to widespread and rapid changes in the atmosphere, ocean, cryosphere (ice), and biosphere, resulting in more frequent and extreme weather events (e.g., wildfires, heat waves, heavy rainfall, dust storms) across the world. In 2024, the cost of extreme weather events in the U.S. was $182.7 billion — representing 27 separate weather and climate events incurring losses of more than $1 billion.1
Climate risk is relevant to nearly all industries, manifesting itself in a variety of ways and over varying time horizons. To gain a comprehensive understanding of a company’s financial quality and future business model sustainability, Boston Trust Walden analysts consider climate-related risks and opportunities in our analysis of securities. As active owners, we then focus our customized engagement on strengthening business systems and decision-making practices of the companies in which we invest client assets, with the objectives of enhancing risk management, improving enterprise resilience, and growing long-term shareholder value.
About This Report
This report provides an overview and update on our efforts to manage climate risk at Boston Trust Walden. The report aligns with guidance from the Taskforce on Climate-Related Financial Disclosures (TCFD) framework. In 2023, the IFRS Foundation became home to the TCFD recommendations as well as the industry-recognized SASB standards. The IFRS strategically leveraged these frameworks as a foundation for the first global baseline of sustainability disclosure standards published in June 2023. These standards include the IFRS S2 standards, which guide climate-related disclosures.
Report Summary
We have a robust process to identify and assess climate risks.
The changing climate is an extraordinary challenge with far-reaching economic, environmental, and societal implications, creating risks and opportunities for companies and investors. For companies, impacts may manifest directly in the form of physical risks (e.g., extreme weather, drought, flooding, wildfires) and/or transition risks (e.g., technology shifts, rising commodity costs). Companies may also face indirect (e.g., supply chain) and systemic risks (e.g., economy-wide impacts on worker productivity due to heat stress). To gain a comprehensive understanding of a company’s financial quality, Boston Trust Walden analysts consider climate-related risks and opportunities in our securities analysis across investment strategies.
We seek to manage and mitigate climate risk through active ownership.
As long-term investors, we engage companies with the goal of strengthening business systems and risk management, improving enterprise resilience, and growing long-term shareholder value. In 2024, Boston Trust Walden engaged more than 100 companies to improve climate-related risk management and enterprise resilience. Leveraging our approach to active ownership, we seek to support companies as they advance climate risk mitigation and adaptation, encouraging more robust disclosure, and supporting the capacity building required to decarbonize their businesses.
While direct engagement is foundational to our approach to active ownership, we also engage regulators and policymakers in the US and internationally on investor-relevant topics, including investor access to robust corporate disclosure of climate-related risks and opportunities. To assess how companies are managing the financial risks and opportunities presented by climate change, investors need clear, comparable, and company-specific information. Enhanced corporate disclosure on significant ESG risks and opportunities — including climate risk — bolsters oversight and accountability, strengthens management, and improves corporate policies, practices, and performance.
Companies across Boston Trust Walden investment strategies are taking action to address climate risks and opportunities.2
Understanding the Potential Impacts of Climate-related Risks and Opportunities on Investment Strategies
The World Meteorological Organization (WMO) reported that 2024 was the first observable year where average surface temperatures rose above 1.5 degrees Celsius, when compared to preindustrial temperatures.3 Rising temperatures are leading to widespread and rapid changes in the atmosphere, ocean, cryosphere (ice) and biosphere, resulting in more frequent and extreme weather events (e.g., wildfires, heat waves, heavy rainfall, dust storms) across the world. As such, nearly all companies are exposed and likely to be affected by climate-related risks. The extent, significance, and timing of potential financial impacts depend on factors like a company’s industry, business model, location, and supply chain, among others.
Climate-related risks can present as either physical risks or transition risks. Physical risks can be considered acute (e.g., impacts of an extreme weather event) or chronic (e.g., changes in weather patterns disrupting access to water and other natural resources). Transition risks can be associated with impacts from changing regulation, shifts in technology, market behavior, and rising commodity costs, among other impacts. Importantly, companies may also face indirect (e.g., supply chain) and systemic risks (e.g., economy-wide impacts on worker productivity due to heat stress).
Physical and transition climate-related risks can be both distinct and interconnected. For example, a company with elevated physical risk exposure due to operations in regions experiencing more intense and frequent wildfire events may need to invest in more resilient infrastructure and land-use planning. That same company may also be simultaneously exposed to related transition risks linked to evolving government regulations for building standards and/or reduced demand due to customers seeking to de-risk and avoid disruption from the company’s supply chain.
Climate-related opportunities also manifest in varying forms, including resource efficiency initiatives, enterprise resiliency building, energy sourcing independence, and product and service solutions, among others. For example, a company delivering AI solutions with higher performance per unit of energy stands to benefit in the context of increasing power demands and grid limitations; a construction company offering solutions to enhance resilience to wildfire or prolonged heat waves may benefit as extreme weather events increase in frequency and duration; and a company providing advanced technology to improve water use in the agricultural industry may benefit from increased demand for its products as water stress becomes more apparent.
Identifying and Assessing Climate-Related Risks and Opportunities
We seek to invest client assets in a set of securities well-situated to produce attractive risk-adjusted returns over a long-term investment horizon. We view ESG analysis — including the evaluation of climate-related risks and opportunities — as part of our mandate to ensure client assets are invested in securities that we believe are well-positioned to minimize risk and produce sustainable returns over full market cycles.
Boston Trust Walden analysts are responsible for identifying potentially material climate-related risks and opportunities and integrating those findings into investment analysis, as appropriate.
In the assessment of a company’s financial quality and business model sustainability, our analysts examine a company’s ESG performance to enhance our understanding of potential financial outcomes associated with issues ranging from risks (e.g., losing the license to operate) to opportunities (e.g., generating new sources of revenue). The potential materiality of climate-related risks and opportunities depends on numerous factors, including, but not limited to, a company’s sector/industry, its competitive landscape, and its operating model.
We consider multiple dimensions and timeframes associated with climate-related risks and opportunities in security selection and portfolio construction. Climate-related risks can be apparent in the short, medium, and long term. At Boston Trust Walden, we consider short-term to be 1-2 years, medium-term to be 3-10 years, and long-term to be 10 or more years.
Managing Climate Risk via Active Ownership
As long-term investors, Boston Trust Walden uses the tools of active ownership to help mitigate climate risk across investment strategies Our direct company engagement is focused on enhancing risk management, improving enterprise resilience, and growing long-term shareholder value. All engagement is customized to address the specific business model and operating context of the individual company.
Leveraging our approach to active ownership, we seek to support companies as they advance climate risk mitigation and adaptation, encouraging more robust disclosure and supporting the capacity building required to decarbonize and advance resilience across the value chain.
While direct engagement is foundational to our approach to active ownership, we also engage regulators and policymakers in the US and internationally on investor-relevant topics, including investor access to robust corporate disclosure of climate-related risks and opportunities. We believe that enhanced corporate disclosure on significant ESG risks and opportunities — including climate risk — bolsters oversight and accountability, strengthens management, and improves corporate policies, practices, and performance.
The current state of voluntary climate risk disclosure makes it especially challenging for investors to systematically consider risks. While voluntary climate risk disclosure has strengthened in recent years, the lack of a consistent regulatory mandate has led to varied information provided across multiple reporting regimes. This inconsistency has allowed companies to self-select which metrics and information to disclose and has caused confusion among investors about which disclosures to trust and use.
Access to comprehensive and decision-useful corporate sustainability data, including actionable metrics and goals, enables investors and other stakeholders to understand whether and how effectively companies identify and manage material and salient ESG risks and opportunities — including those related to climate risk. From a company perspective, robust management and disclosure can help corporate leaders increase operational efficiencies, enhance competitiveness and brand recognition, identify revenue-generating opportunities, and respond to an evolving regulatory landscape.
In 2024, Boston Trust Walden continued our participation in the Investor Advisory Group to the International Sustainability Standards Board (ISSB). The ISSB is a standard setting body created by the International Financial Reporting Standards (IFRS) Foundation tasked with developing a comprehensive global baseline for sustainability-related disclosures connected to financial statements. In 2023, the IFRS released two frameworks to guide corporate disclosures; S1 is focused on enterprise-wide disclosure of sustainability-related information and S2 guides climate-related disclosures.
In support of this global standard, in 2024, Boston Trust Walden submitted comments to 12 international jurisdictions that had introduced proposals to mandate corporate reporting in line with the IFRS Sustainability Disclosure Standards. Encouragingly, the Australian Accounting Standards Board released its finalized standards incorporating certain key updates aligned with feedback we provided. As of year-end 2024, 35 jurisdictions, representing nearly 60% of global GDP, required or are planning to require ISSB Standards application in their legal or regulatory disclosure frameworks.4
In the absence of a regulatory mandate within the US, state-based regulation is emerging, creating a potential patchwork of regulations for companies to navigate. In this context, Boston Trust Walden advocates for interoperability and alignment with the IFRS ISSB standards. In 2025, Boston Trust Walden responded to a public comment request from the California Air Resources Board (CARB). In preparation for implementation of new climate disclosure requirements in 2026, CARB sought stakeholder input. In our comment letter, we encouraged the regulator to align requirements and implementation guidance with the ISSB standards, IFRS S1 and S2, to the greatest extent possible and practical. We believe this alignment is critical for ensuring reporting companies can efficiently deliver climate-related disclosures that are both consistent and comparable for investors.
Evaluating Climate Risk Mitigation within Investment Strategies
At Boston Trust Walden, we blend fundamental securities analysis with active ownership to identify, assess, and help mitigate climate risk in our investment strategies. To measure progress, we evaluate three metrics we have identified as markers of strengthened climate risk mitigation among companies held within our investment strategies.
Climate Transition Plans
To assess how companies are managing the financial risks and opportunities presented by climate change, investors need clear, comparable, and company-specific information. Transition plans are an essential component of climate risk disclosure, as they provide a forward-looking roadmap of a company’s related strategy, governance, and risk management. Transition plan disclosures indicate management’s view of material climate-related risks and opportunities that could suppress or promote long-term value creation, integration of climate considerations into enterprise risk management processes, and strategies to build business resilience under a range of climate scenarios in the short, medium, and longer term.
Approximately 28% of companies held across our investment strategies, representing approximately 23% of discretionary equity assets under management, have developed transition plans to address climate-related risks and opportunities.5
Science-Based Targets
Companies with science-based GHG emissions reduction targets signal to investors they are actively working to reduce risk, mitigating exposure to future/evolving regulation, energy price fluctuations, technological disruptions, and/or reputational damage. Establishing science-based targets may also lead to cost savings, business model innovation, new product and/or market opportunities, supply chain resiliency, energy independence, and competitive positioning to attract customers prioritizing lower-carbon products/services or climate risk mitigation solutions. In short, science-based target setting is a way for companies to demonstrate how they are actively working to protect long-term shareholder value.
Approximately 36% of companies held across our investment strategies, representing approximately 33% of discretionary equity assets under management, have established GHG emissions reduction targets aligned with climate science, signaling to investors their efforts and ambition to mitigate climate-risk exposure and increase enterprise resilience.6
Carbon Intensity
For more than a decade, Boston Trust Walden has disclosed the carbon intensity of model portfolios. The carbon intensity of each investment strategy’s model is a function of how much carbon each portfolio company emits, normalized by revenue, and the weight of each holding in a strategy. While an imperfect metric in the context of voluntary corporate disclosure, calculating the weighted average carbon intensity (WACI) does offer some insight into portfolio-level climate-transition risk exposure.
The table below presents the weighted average carbon intensity for nearly all of Boston Trust Walden’s equity models as of year-end 2024. Consistent with previous years, our model portfolios continue to exhibit lower (better) weighted average carbon intensity than their respective benchmarks, ranging from 25% – 74% less carbon intensive than their benchmarks in 2024.7
Oversight of Climate-Related Risks and Opportunities
Boston Trust Walden’s managing directors have board and management-level roles in our employee-owned organization. They oversee investment activities of Boston Trust Walden,
including Boston Trust Walden’s responsible investment strategy and implementation, inclusive of climate-related issues.
Boston Trust Walden’s Co-Chief Executive Officers (Co-CEOs) manage the strategic priorities of the firm. The Director of ESG Investing reports to one of the Co-CEOs and manages the team responsible for ESG analysis and active ownership strategies, including direct engagement, proxy voting, public policy, and thought leadership. This team works in collaboration with our fundamental analysts to integrate consideration of relevant ESG-related risks and opportunities into investment decision-making.
Three committees serve as the primary forums for discussion of key risks and opportunities related to ESG issues, including climate: Securities Research Committee (SRC), Active Ownership Committee (AOC), and ESG Research & Engagement Committee (REC). SRC considers climate risks and opportunities related to security selection, inclusive of ESG
integration. AOC oversees and affirms Boston Trust Walden’s activities related to proxy voting, company engagement, and public policy advocacy. REC reviews and discusses active ownership efforts and provides input on emerging or complex ESG research issues and industry trends. These processes incorporate our assessment and management of climate-related risks and opportunities.