How can you integrate net zero in multi-asset portfolios?

The fast view

• Decarbonisation is not just about renewable energy. It is also about resource efficiency, electrification and waste management right through the supply chain.
• A lot of the focus to date has been on equities, but this needs to broaden out, as there is a risk that investors simply move into asset-light business or out of ‘difficult’ areas, such as emerging markets, doing nothing to achieve net zero.
• Countries are at different stages of decarbonisation. While it is important to look at the world as a whole and the role of governments, investment decisions should be bottom-up and not too top-down as you could make investment decisions for the wrong reason.
• Across our multi-asset portfolios, we use bottom-up security selection, which gives us much more choice in how we build a portfolio and align it to sustainability objectives.
• We look beyond the data, thinking about how companies and countries impact on their surroundings. We consider natural, social and human capital. We believe this will ultimately be valued and priced by the market.
• We don’t rely on external scores preferring to undertake fundamental research, as the level of disclosure from companies and countries is still an issue.
• We think about the challenge of reaching net zero across three pillars:
  • focusing on decarbonisation within individual companies and countries
  • allocating to solution providers
  • monitoring our progress through time