We integrate sustainability – and climate change in particular – in our investment processes.
We invest in green bonds. We assess both the sustainability of the issuer and the issue. Green bonds can support companies in less sustainable sectors achieve their transition, for example, a cement company that is looking to finance activities that decrease the carbon emissions of production.
Green and sustainable bonds can trade at a premium to their grey (or conventional) counterpart. Increasingly we are comfortable with the premium. First, we consider it a factor in the overall qualitative assessment of the investment. Second, while the supply is growing, demand is growing more quickly, which could lead to a widening premium, which benefits an active strategy.
We invest in low carbon equity. Our preference is to engage (and change behaviour) rather than divest. That said, in the same manner that some investments are judged to be too risky irrespective of returns, some investments will be judged to have too negative a real-world impact, in particular, with regard to systemic issues, such as climate change or respect for human rights. This is why we have allocated – and will continue to allocate – to low carbon physical equity.
We believe scenario analysis helps inform our investment decisions.
Our three favoured scenarios are:
A 1.5°C degrees Paris-aligned transition – this is our goal, how we direct our capital and how we engage. This assumes measures are taken that will keep the rise in temperature limited to 1.5 degrees.
A 2°C degrees late transition (or, ‘inevitable policy response’) – this is our forecast of what we think will happen.
A 3°C slow transition – this is our book-end scenario.
We measure and minimise our own firm’s carbon emissions, for example, we’ve selected a green energy supplier for our Rotterdam office and we seek to minimise travel or take the train where possible. Where we do have emissions, we offset.
For 2020, the Cardano Group emitted 491 tonnes of carbon dioxide. Our report, prepared by South Pole, is available on request. Our chosen offset is Cookstoves for Maasai Communities, Kenya, which has links to BIX Capital, an impact investment initiative funded by Cardano Development.
Finally, we adapt
Sustainability – and climate change in particular – is a dynamic concept.
We are owner-managed, which gives us the freedom to try new things and to do things differently. We know the data is imperfect and the methodologies are still under development, particularly for hard-to-reach asset classes such as private equity, infrastructure or derivatives.
Our approach will evolve as our understanding of science, technology and corporate and investment practice evolves. We will update our net zero commitment periodically to ensure we’re at the forefront of addressing the climate crisis.