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.
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.
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.
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.
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.