Walking the talk about net zero goals

While investors can decarbonise their portfolios by divesting or screening high-emitting assets, this alone may not contribute meaningfully to a true low-carbon economy. Further, it is achievable to optimize portfolios for less carbon exposure – 20% to 45% less carbon intensive than the benchmark – while retaining risk-return characteristics as a cheer to being on track for targets.

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These are largely emissions-based reweightings that penalize companies with high emission profiles and can effectively contribute to decarbonising the portfolio. However, solving true economic decarbonization and an orderly transition through managed diversified portfolios requires a carefully designed approach that can look beyond quantitatively reducing emissions to meet net-zero targets.

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We work closely with our asset managers to constructively challenge and explore climate risk management strategies and emerging opportunities. We are open to looking closely at examples where companies with high emissions today can also make a strong case for investments looking to the future through a climate lens, when we qualitatively assess their transition readiness.

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Fossil fuels are often compared to tobacco until we understand that many fossil fuel-intensive companies are actually able to deliver both the economy and the decarbonisation of their portfolio. Asset owners play a privileged role in the investment value chain to exert influence that can be meaningful in decarbonising the real economy through tools such as advocacy, engagement and voting.

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We spend a lot of time with management to understand such asset-specific decarbonization trajectories. Complicated carbon calculations are only possible through consultation with managers and company boards. We use this information to help our clients make investment decisions.

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While investors can decarbonise their portfolios by divesting or screening high-emitting assets, this alone may not contribute meaningfully to a true low-carbon economy. Further, it is achievable to optimize portfolios for less carbon exposure – 20% to 45% less carbon intensive than the benchmark – while retaining risk-return characteristics as a cheer to being on track for targets.

These are largely emissions-based reweightings that penalize companies with high emission profiles and can effectively contribute to decarbonising the portfolio. However, solving true economic decarbonization and an orderly transition through managed diversified portfolios requires a carefully designed approach that can look beyond quantitatively reducing emissions to meet net-zero targets.

We work closely with our asset managers to constructively challenge and explore climate risk management strategies and emerging opportunities. We are open to looking closely at examples where companies with high emissions today can also make a strong case for investments looking to the future through a climate lens, when we qualitatively assess their transition readiness.

Fossil fuels are often compared to tobacco until we understand that many fossil fuel-intensive companies are actually able to deliver both the economy and the decarbonisation of their portfolio. Asset owners play a privileged role in the investment value chain to exert influence that can be meaningful in decarbonising the real economy through tools such as advocacy, engagement and voting.

We spend a lot of time with management to understand such asset-specific decarbonization trajectories. Complicated carbon calculations are only possible through consultation with managers and company boards. We use this information to help our clients make investment decisions.