Your path to portfolio transition
“Many investors are not yet equipped to invest in a decarbonizing economy and don’t even know where to start. Our analytics and advice help all investors transition their portfolios to address the challenges of managing climate risk, meeting return objectives while staying on target for a net-zero outcome.”
– Helga Birgden, Global Leader Sustainable Investment
Institutional investors such as pension funds, financial institutions, insurers, wealth managers, endowments and foundations, hold trillions of dollars in assets1 in their portfolios that are highly exposed to climate transition risk in a decarbonizing economy. If investors do nothing to address this issue today, climate change could reduce their ability to deliver on investment promises such as pension payments. We believe that now is the time for investors to reposition portfolios for the transition to a zero-emission economy. Mercer’s analytics help investors assess their investments by categorizing the portfolio on a spectrum — going from “gray” or high-carbon, low-transition investments to those that are already low-/zero-carbon or are climate solutions — “green” investments. Many companies lie in the middle, and these also need to be assessed on their capacity for transition in the future.
The scientific evidence shows the situation is urgent. We’ve already had a 1°C increase in average global temperatures over preindustrial times. According to current science1, we could be facing a 2°C increase in as few as 30 years — a climate humans have never experienced. As a result, investors should educate themselves on the downside risks they face because of the transition — as well as potential opportunities to benefit from it. In particular, many companies, investors and governments have announced alignment with the targets of the 2015 Paris Agreement, including taking measures to prevent temperatures from increasing past the 1.5ᵒC threshold2.
Addressing climate change requires reducing fossil fuel emissions. Studies indicate that the transition to a low carbon economy is already underway3. Consider how technology has driven down the cost of renewables. 2019 was the fifth year in a row in which renewable capacity additions, outstripped additions from fossil fuels and nuclear combined, for example, NextEra Energy now has a larger market capitalization than ExxonMobil.
As investors, we need to try to assess companies’ ability or willingness to transition toward limiting global temperature increases and how well-positioned they are for the low-carbon economy. To make a proper assessment, we need to get serious about the risks. One of the key findings of our Investing in a Time of Climate Change — The Sequel report was that investors should position for a below 2ᵒC scenario, which we believe will offer improved investor outcomes.
Helga provides investment advice on ESG and climate change in complex assignments to trustees, directors and investment boards of pension funds, sovereign wealth funds, endowments and insurers. She leads Mercer’s global Sustainable Investment Team.
Jillian advises super funds and other institutional investors on integrating ESG factors, sustainability trends, climate change and stewardship within investment processes. She is a key contributor in developing Mercer’s intellectual capital and integrating sustainable investment within Mercer globally, including within the delegated solutions. Jillian was project manager and co-author for Mercer’s 2015 Investing in a Time of Climate Change report and The Sequel in 2019. She has written and presented on water — too much and too little — and helped multiple boards balance risk, return and reputation implications for sensitive investment topics.
Nick has responsibility for house views on multi-asset-class research and portfolio construction, as well as the development of the strategic research agenda. Nick’s role extends to contributing to strategic policy decisions for the suite of Mercer funds in the Pacific market. This aspect of his role formally links Mercer’s strategic best ideas and forward-thinking research to building discretionary portfolios, ensuring Mercer’s best ideas are mapped to all clients’ advice and funds.
Business Leader, Sustainable Investments, Europe. Kate works with clients to ensure sustainability and ESG issues are reflected in their investment strategies. Kate advises a broad range of clients, including pension funds, endowments, foundations and insurers on sustainability trends, regulatory developments, climate change, stewardship and impact investing.
Kate develops intellectual capital across a range of sustainable investment topics. She has authored and co-authored several recent reports and papers, including Investing in a Time of Climate Change (2015) and The Sequel (2019) and Resilience: Lessons to Scale Sustainable Investment (2020) in partnership with the UK-China Green Finance Centre.
Kylie is responsible for managing approximately AUD $41 billion in assets within Mercer’s multi-manager funds and co-chairs the Global Delegated Solutions ESG Integration Committee where she leads thought leadership on ESG integration and investment stewardship. Kylies team works with clientes to embedded a holistic approach to ESG integration into investment strategy and decision making.
1. Mercer. Investing in a Time of Climate Change — The Sequel, 2019.
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