As a diversified manufacturing company made up of many different business units, IDEX is faced with the challenge of how to implement an effective corporate-wide climate strategy on a decentralized model. IDEX owns businesses involved in DNA testing, food production equipment, fluid metering, fire safety gear, and more. We met with the company alongside Impax Asset Management, our sub-advisor for NEI Environmental Leaders Fund, NEI Global Sustainable Balanced Fund, and NEI Global Corporate Leaders Fund. We wanted to follow up with IDEX after our first engagement meeting last year, especially now that they have a new Chief Sustainability Officer in place.

IDEX is developing its climate strategy from the ground up, and incorporating the diverse business lines in a way that makes sense is taking time. We have observed that the company is serious about the work, and in our view, they are headed in the right direction. For example, they ran a pilot with one business unit to understand the unit’s scope 3 emissions and will seek to apply those learnings across the other units as well. They have an emissions reduction target for 2035 and are considering setting additional interim targets. So far, they are getting good buy-in across divisions by sharing emissions results among them and explaining the cost benefits of reducing their respective carbon footprints. They are also working on how to assess the various physical risks they face.

One interesting and positive sign of their commitment is the hiring of a Sustainability Controller, who works alongside the finance department on data collection and internal assurance. The company was clear that accurate data collection systems are foundational to the strategy. Further, due to its global footprint, IDEX is subject to European sustainability reporting regulations, which are among the world’s most stringent. They noted the Sustainability Controller will be a key contributor to meeting those requirements.

The other main topic we spoke about was the company’s stance on the rapidly shifting political and corporate environment around diversity, equity and inclusion (DEI) policies and programs. Many companies have been reducing disclosure and pulling back or even eliminating some DEI policies and programs in their organization, including Amazon, Meta, and Walmart, to name just a few. IDEX confirmed they are not wavering in their commitments and pointed out that they have been supporting DEI for many years. They consider it to be best business practice and not something to be politicized. Having said that, they are aware that other companies are revising the language used to describe their programs, and they said they may take a similar approach simply to avoid unnecessary scrutiny and hassle.

Next steps:Our sub-advisor Impax is expecting to follow up with IDEX on their physical climate risk assessment, which is an area of specialty for Impax. We intend to review IDEX’s sustainability reporting for ongoing progress on climate and on DEI programs.

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