Climate change risk and your investments
Growing public concern has focused new attention on this major global economic challenge. Here we explain Cazenove Capital’s approach to tackling climate risk within our portfolios.
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:
Portfolio Director and Sustainable Investment Specialist
Emilie joined Schroders in 2011 and currently works as an Associate Portfolio Manager within the Charities team. Emilie is responsible for managing both segregated and pooled portfolios under discretionary, advisory and execution only mandates. Alongside managing client portfolios, Emilie sits on the Ethical Investment Committee. Emilie holds the CISI Chartered Wealth Manager Diploma and the CISI IAD Securities and IMC qualifications. She studied business and management at University of Chichester.
Sustainable Investment Analyst
Catherine joined Cazenove Capital in June 2019 and currently works as a Sustainable Investment Analyst. Prior to joining Cazenove Capital, Catherine worked in the Energy, Environment and Resources department at Chatham House. Catherine holds a Masters from the University of St Andrews.
The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored.