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.
Fund managers unite over ‘net zero’
Fund managers are increasingly speaking with one voice on issues around climate change, with at least 143 global firms so far joining the ‘Net Zero Asset Managers’ initiative. Several big ones signed up last week.
The Australian signatory managers and international firms with strong Australian commitments are, by accident or design, implying increased pressure on the Australian Government to announce a commitment to target net zero carbon emissions by 2050, one of the few OECD countries not to have done so.
Last week (July 7) Franklin Templeton, which has a significant Australian presence, and three of its affiliated managers – Martin Currie, Clearbridge and Brandywine Global – announced they had joined the organisation, which was formed last December.
Many of the 143 signatories signed up by July 8, are also taking part in other new organisations with similar motivations. For instance, Amundi, Europe’s largest fund manager and an earlier signatory to Net Zero Asset Managers, has joined with a French group called ‘Finance for Tomorrow’ which has launched the program ‘Investors for a Just Transition’.
Amundi has separately expressed concern about the losers in society from a transition to net zero, such as farmers, and the need for the winners and society as a whole to limit new income disparities.
Other founding members of the French initiative include AXA Investment managers, Aviva France, CPR Asset Management and Rothschild & Co. They speak for about US$ 4.25 trillion (€3.6 trillion).
UN PRI is also involved in an observational capacity.
The Net Zero Asset Managers so far enrolled speak for about US$143 trillion under management. All members of the six foundation organisations, including UN PRI, are eligible to join – not only fund managers but also asset owners such as super funds.
The largest Australian-owned manager to join is Macquarie, followed by IFM Investors and BT Funds Management. Other international managers with significant Australian presences to have joined Net Zero Asset Managers include Ninety One, Aviva Investors, AXA Investment Managers, BlackRock, Fidelity International, Invesco, Lazard Asset Management, Schroders, Standard Life Aberdeen, State Street Global Advisors, Trillium (a Perpetual subsidiary), UBS and Wellington. Willis Towers Watson is the main consulting firm to join up so far.
The member organisations have to commit to “support the goal of net zero greenhouse gas (‘GHG’) emissions by 2050, in line with global efforts to limit warming to 1.5°C (‘net zero emissions by 2050 or sooner’)”. They also have to commit to support investing aligned with net zero emissions by 2050 or sooner.
