Evaluating Climate Transition Strategies

As long-term investors, the Fundamental Growth and Core Equity (FGC) team recognizes the potential threat of climate change to our investments. And as fundamental investors we need to know whether our portfolio companies have adequately identified the risk that climate change could pose, have assessed its impact, and have come up with a credible climate transition strategy. To better understand the climate transition strategies playing out in the FGC investment universe, Climate Transition Scores have been created to help identify the companies, and sectors, that are best placed to manage the risks ahead and best able to capture related opportunities. We are less focused on companies’ starting points, and instead we believe that leaders on the path to a decarbonized world can come from a variety of sectors. Energy is the “hardest to transition” sector, whereas Communication Services would be one of the “easiest to transition” sectors. The Financials sector scores favorably on its own emissions, but its financed emissions and lending make climate transition a more complex challenge. All three of these sectors present opportunities for fundamental investors.