GLOBAL - The integration of climate change into portfolio management remains a difficult task but not doing so is a failure of fiduciary care by asset managers, an institutional investor has claimed.
Carlos Joly, chairman of the Climate Change Scientific Committee of Natixis Asset Management, told IPE the integration of climate change into portfolio management is still in its early stages.
"One way is to take the narrow thematic approach such as investing in alternative energy funds," he said. "However, that is unsatisfactory for us because it does not address the breadth of climate change impacts throughout the economy. It is also a niche approach, which all investors tend to enter and exit at the same time. Carbon footprinting on an index is a step forward from the thematic approach, but ultimately does not reflect the solutions to the problems," argued Joly.
He continued: "We prefer to identify positive and negative impacts and actively integrate this in stockpicking in the 40 or so most affected sub-sectors. In any event, not integrating climate change into the portfolio management at all is a failure of fiduciary duty."
At the same time as Natixis is increasing its focus on climate change, global consultancy Mercer has launched a research project to assess the implications of climate change on strategic asset allocation decisions made last October.
The two-part report- expected to be published in October this year - will consist of a public report in which the broad findings will be shared with the industry, as well as a tailored report for each asset owner that commits to the project, and they in turn will be benchmarked against other project partners.
The study will produce a qualitative framework to outline risks and opportunities by region and asset class, as well as considering the sector effects, which can then be used as an overlay to strategic asset allocation decisions.
It is a collaborative endeavour led by the firm's responsible investment and financial strategy groups, together with international asset owners - such as Norway's Government Pension Fund and APG Investments - as well as a climate change think-tank and industry bodies with a specialist interest in sustainable investment.
Natixis Asset Management launched a global equity climate change fund with no tracking error last year, which includes investments in railroads, coastal shipping, IT and green infrastructure.
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com
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