Insights


Lose the Carbon, Keep the Returns


What Does It Take to Transform Your Carbon Profile?


It Takes Less Than You Think.

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.

Climate Risk Brings Opportunity

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 investment opportunity as the economy reworks against the impact of climate change. Read on to discover how you can transform your equity and fixed income portfolios to lose the carbon and keep the returns.


Transform Your Equity Portfolio


Our Solution offers fully customizable equity exposure and allows you to select either your preferred carbon-reduction objective or targeted tracking error.

 


Choose Your Ideal Carbon Reduction Range (%)

Source: SSGA, as of 1 January 2020.

Source: SSGA, as of 1 January 2020.

Source: SSGA, as of 1 January 2020.

Source: SSGA, as of 1 January 2020.

Low-Carbon Equity Index Solution

State Street’s Low-Carbon Equity Index Solution uses advanced portfolio techniques that are designed to achieve the most efficient trade-off between carbon reduction and tracking error, while achieving long-term returns broadly in line with the underlying index benchmark.

The Solution allows clients to customize their portfolios to align with their specific carbon goals and risk budgets. In addition to setting the level of targeted carbon emission reduction or tracking error, investors can pre-select the developed market equity benchmark that represents their chosen starting universe.

The Low-Carbon Equity Index Solution is designed to help investors make informed decisions about the trade-off between carbon reduction and tracking error — and determine their optimal positioning along what we call the Efficient Carbon Frontier.

With our Solution, we can build customized portfolios that either 1) minimize the level of tracking error for achieving the client’s targeted level of carbon reduction or 2) maximize the level of carbon reduction for the client’s targeted level of tracking error.

 

Source: SSGA, as of 1 January 2020


Learn more about designing effective portfolios for climate-related risk management and the transition to low-carbon economies.


Transform Your Bond Portfolio


We offer fully customizable corporate bond exposure with a client-selected carbon reduction target range.
 
Minimizes tracking error while maintaining benchmark characteristics.

 


Choose Your Ideal Carbon Reduction Range (%)

Source: SSGA, as of 1 January 2020.

Source: SSGA, as of 1 January 2020.

Source: SSGA, as of 1 January 2020.

Source: SSGA, as of 1 January 2020.

Achieving Lower Carbon with Familiar Returns

We are helping investors understand, control and benefit from the quantifiable trade-offs between carbon reduction and tracking error. Most importantly, we are demonstrating that significant improvements in carbon intensity can be achieved with minimal impact to credit quality or interest-rate risk relative to corporate bond benchmarks.

Aligning for the Future

The State Street Low-Carbon Corporate Bond Strategy seeks to create customized portfolios with a lower carbon footprint and similar returns to the performance of the client’s selected fixed income benchmark.

The Strategy is designed to create customized portfolios that achieve the client’s goals for carbon reduction within constraints for tracking error, credit quality, duration, interest rate exposure and other factors.


Learn more about effectively integrating ESG into your fixed income investments.


Go Further with Our Sustainable Climate Strategy


This breakthrough strategy offers global equity exposure, while effectively targeting climate change. It achieves results through a powerful mix of mitigation of current impacts and adaptation to future climate risks.

Improving portfolios for the present and positioning for the future.

 


Source: SSGA, as of 1 January 2020.

The Next Wave, Now

The State Street Sustainable Climate Strategy is a long-only investment approach that uses a mitigation + adaptation methodology to build climate change thematically into equity portfolios.

Designed from the ground up to be flexible, the customizable framework allows us to create client portfolios that target reductions in current and future carbon emissions, increase exposure to green revenues and increase resiliency to the physical risks posed by climate change.

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 the 21st century. It's designed for investors who wish to prepare their portfolios for the transition to a low-carbon economy, in a scalable and risk-aware way. It's available now to meet those needs.

Our innovative and highly sophisticated framework establishes a new frontier in the effort to build climate change thematically into equity portfolios


Delivers Across the Board

1. Employs Mitigation and Adaptation

To target net carbon emission reductions in the portfolio, the Strategy reallocates capital away from companies with high current and embedded carbon emissions and brown revenues to companies that generate green revenues from low-carbon technology.

In addition to this focus on mitigating the drivers of climate change, the Strategy also increases exposure to companies that are actively adapting to the actual or expected future effects of global warming and other environmental changes, helping investors to build more climate-resilient portfolios in the process.

2. Aligns with the Paris Agreement

The Strategy aligns with the ambitious goals of the Paris Agreement and prepares portfolios for the possible introduction of a carbon tax and other regulatory initiatives that could accompany the transition to a low-carbon economy.

3. Leverages Multiple Data Sources

Given the multifaceted objectives of the Strategy, our framework integrates data from leading providers: S&P Trucost (carbon emission intensity, fossil fuel reserves and brown revenues), FTSE Russell (green revenues) and ISS ESG (adaptation). The selected data helps isolate with precision the climate parameters we target.

4. Meets Client Objectives Flexibly

We designed the Strategy framework so that it could be customized to meet each investor's needs in terms of climate priorities, desired benchmark, tracking-error budget and any exclusions needed to meet other international norms or sustainability considerations.


Read the Trillion Dollar Windfall to grasp the scale of the transition to renewable energy and the investment opportunities it could bring.


Contact Us


For questions or for further information about the State Street Gloabl Advisors ESG Investment Solution, please email us at esg@ssga.com

Important Information

FOR INVESTMENT PROFESSIONALS ONLY. 2899102.1.1.EMEA.INST