Our plan to address the climate crisis
Sustainability has always been at the core of our culture and how we run our business. We approach sustainability from first principles. We are sustainable investors because it is the right thing to do.
The climate crisis is the most fundamental challenge the global economy faces. The climate crisis refers to global warming and the resulting increase in weather events driven by the emissions of greenhouse gases.
Despite recent momentum, government action to tackle the climate crisis has so far been highly insufficient. Climate change is now a widely established and socialised concept within financial markets – both as a financial risk, due to transition and climate-related risks, and an investment imperative, because the way in which we direct capital will support (or hinder) climate targets.
Here we set out our approach
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.