Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Qantas Super, CEFC cornerstone investors in new Ellerston fund
Qantas Super and the Clean Energy Finance Corporation (CEFC) have tipped a combined $100 million into the Ellerston 2050 Fund to support the work of Australia’s “carbon abatement enablers” – companies providing technology and services to reduce carbon footprints.
The fund will focus on investing in listed and unlisted small and mid-cap companies with “low carbon products, technology and services that enable energy efficiency or facilitate the accelerated adoption of low emissions technologies.”
“We value the opportunity to provide environmentally aligned capital to support the work of Australia’s carbon abatement enablers,” said Andrew Spence, chief investment officer of Qantas Super. “This approach is consistent with our commitment to deliver great investment performance to our members, while also achieving net zero carbon emissions across our investment portfolio by 2050.”
Qantas Super believes these companies represent “a new area of economic growth”, able to capitalise on the growing wave of investment into emissions reductions. Companies targeted by the fund will also be assessed on their ability to contribute to meaningful carbon abatement.
“We are delighted to be working with Qantas Super and the experienced Ellerston Capital team to support the growth of this emerging asset class in both the listed and unlisted equities sector,” said CEFC Ian Learmonth. “We are confident the 2050 Fund will enable fast growing companies to benefit from the transition to net zero emissions by bringing innovative products and service solutions to market.
“By backing these new businesses, we are demonstrating how we can support economic growth while also reducing emissions.”
In June, Qantas Super awarded a mandate to Calvert Research and Management to reduce the carbon intensity of its Australian and global equity portfolios, with Parametric responsible for “efficient implementation” of the mandate.
“We have committed to reaching net zero carbon emissions across our investment portfolio by 2050,” Spence said at the time. “This is the latest step on our ongoing journey to ensure we continue to deliver sustainable investment outcomes that meet the retirement needs of our members. As part of this commitment, we are taking actions to reduce the carbon intensity of our portfolios.”
“It’s a long road to 2050, so we’ve broken our net zero goal into three phases. In Phase 1, we aim to achieve a 24 percent reduction in carbon emissions from the 30 June 2020 baseline by 2025.”
