To help investors build more climate-resilient portfolios, our team are designing the next generation of climate change solutions.
The question facing many institutional investors is no longer when will they need to take steps to limit the impact of climate change on their portfolio - but how to do it now.
We believe climate change is one of the biggest risks in investment portfolios today. These risks impact almost all segments and industries – not just the obvious polluters. However, with climate risk comes tremendous opportunity with the increasing attractiveness of renewable energy driving investment to fossil fuel alternatives.
We’ve developed a number of highly eﬀective solutions that can quickly help you address climate risk and position your portfolio for the transition to the coming low-carbon economy.
Read on to discover how you can transform your equity and fixed income portfolios to lose the carbon and keep the returns.
Our Climate ESG International Equity Strategy (the Strategy) uses a ‘mitigation and adaptation’ methodology to systematically incorporate the climate change thematic into a global equities portfolio. At the same time, the Strategy seeks increased exposure to companies that score well on our ‘Responsibility Factor’ (R-Factor™), and screens out companies with ESG risk and reputational issues.
The Strategy is aligned with the most ambitious goals stemming from the landmark 2015 Paris Agreement — including limiting climate change to the 2° Celsius warming scenario over post-industrial levels1.
It's available now to meet those needs.
The Strategy seeks to achieve the most efficient trade-off between climate targets, R-Factor™ improvement, tracking error and diversification, while achieving long-term returns broadly in line with the MSCI World ex-Australia Index.
The Strategy is characterised by the following:
Reallocates capital away from companies with high carbon emissions and brown revenues, and increases exposure to new energy and green companies.
To help build a more climate-resilient portfolio, the Strategy also increases exposure to companies working proactively to minimise their exposure to actual or expected physical, economic and regulatory impacts of climate change.
The Strategy aligns with the ambitious goals of the Paris Agreement — including limiting climate change to the 2° Celsius warming scenario relative to pre-industrial levels.1
The investment process begins by excluding companies involved in activities relating to controversial weapons, nuclear weapons, tobacco, severe ESG controversies and violations of the UN Global Compact.
The Strategy framework can be customised to meet each investor's needs in terms of climate and ESG priorities, desired benchmark, tracking-error budget and any exclusions needed to meet international norms or sustainability considerations.
The Strategy is available via a separately managed account only.
Our Low-Carbon Equity Index Solution offers fully customisable equity exposure and allows you to select either your preferred carbon-reduction objective or targeted tracking error.
Our Low-Carbon Corporate Bond Strategy offers fully customisable corporate bond exposure with a client-selected carbon reduction target range. The strategy seeks to minimise tracking error while maintaining benchmark characteristics.
Our climate reporting is designed to help clients understand how their strategy performs against investment objectives and climate focused objectives. The report can potentially help clients meet regulatory obligations, as well as their climate reporting obligations to beneficiaries, trustees, and other stakeholders.
1 IPCC (Intergovernmental Panel on Climate Change). 2014. “IPCC Fifth Assessment Report: Climate Change 2014.” https://www.ipcc.ch/report/ar5/.
2 The above targets are as of 1 June 2020 and are subject to change as both the science and the data behind climate investing evolves. Targets are relative to the MSCI World ex-Australia Index.
Investing involves risk including the risk of loss of principal. Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions. Investing in foreign domiciled securities may involve risk of capital loss from unfavourable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.
The returns on a portfolio of securities which exclude companies that do not meet the portfolio's specified ESG criteria may trail the returns on a portfolio of securities which include such companies. A portfolio's ESG criteria may result in the portfolio investing in industry sectors or securities which underperform the market as a whole.
Responsible-Factor (R-Factor) scoring is designed by State Street to reflect certain ESG characteristics and does not represent investment performance. Results generated out of the scoring model is based on sustainability and corporate governance dimensions of a scored entity.