Climate change is becoming a defining theme of the global economy. Rigorous strategies are needed for investors to manage risks – and capitalise on opportunities – during the expected transition to a decarbonised world.
In the face of the climate change challenge, Cazenove Capital, part of the Schroders Group, has dedicated resource and capabilities to help understand and manage the risks of a changing environment. This is so that we can ensure our clients’ portfolios are positioned for the future.
Alongside launching a dedicated Climate Change website, the specialist sustainability team at Schroders has created numerous investment tools to enable us to understand and mitigate climate risks, including the Climate Progress Dashboard. This monitors change indicators across four categories that have the most influence on limiting global temperature rises: political change, business and finance, technology solutions and entrenched industry (such as fossil fuel use).
At the heart of our approach is a focus on stewardship and engagement. Our experts believe that dialogue with individual companies on their forward-looking strategies will be more effective than divesting from the industry completely.
We can use our influence as a large asset owner to encourage companies to have more robust climate change policies, and work with company management to facilitate positive change.
For example, in 2018 the Schroders sustainability team carried out more than 200 company engagements covering carbon emissions, reduction targets, physical risks, and analysis and disclosure. This is in line with the Task Force on Climate-related Financial Disclosures recommendations, a market-led initiative to help companies report on climate-related risks.
Where Cazenove Capital invests in carbon intensive sectors, we favour companies that show commitment to moving towards a less carbon intensive economy, as we believe these are the companies most likely to thrive through the energy transition.
For clients who want to see certain environmental policies reflected within their investments, we have a range of solutions and can tailor portfolios across a spectrum of climate-smart investment approaches, from complete divestment to targeted solutions to global energy needs, such as renewable energy and specific technologies. We can incorporate these themes as part of a well-diversified portfolio looking to achieve strong risk-adjusted returns.
For charity clients, we manage the Responsible Multi-Asset Fund, which has an explicit policy around climate change, specifically excluding certain fossil fuels while actively investing in renewables. Its policy incorporates a three tiered approach to tackling climate change through our investments:
- Exclusions: Exclude investment in the most carbon intensive fossil fuels - thermal coal and tar sands
- Engagement: Use our influence as active owners to encourage and facilitate positive change
- Investment: Actively invest in renewable solutions to our global energy needs – through renewable energy and new technologies
As part of the Schroders Group, we support or are actively involved in the following climate-related initiatives: