- Research team reviews portfolio ‘decarbonising’ strategies for accuracy of exposure and outcomes
- Factor-exposure1 management expertise leads to a more precise reflection of HESTA’s desired exposure
SYDNEY, 19 April 2016 – Russell Investments has published new research investigating how investors can reduce the carbon footprint of their equity portfolio without materially affecting
investment performance. The research follows work undertaken with HESTA—the superannuation fund for people in the health and community services industry—to deliver a new low-carbon, global equity investment
The pioneering research report by a trio of Russell Investments’ equity strategy experts is now available through the firm’s Customised Portfolio Services microsite. In the report, the authors analyse four effective decarbonisation strategies and provide readers with a framework to evaluate them based on a common investment objective and additional measureable ‘success’ criteria.
“When we looked across the full range of success criteria and alignment with the Montreal Pledge and the Portfolio Decarbonisation Coalition2, we sought the best combination of robustness, intuition and transparency,” said Scott Bennett, director, Equity Strategy and Research, at Russell Investments. “The research validated our unique outcome-oriented approach developed to achieve a greater than 50% reduction in the carbon footprint and deliver benchmark-like returns.”
Regarding Russell Investments’ recent partnership with HESTA, it highlights a growing global investment trend that parallels the concern expressed by a consensus of world leaders who seek to reduce carbon emissions. In Australia, for example, investors already have dedicated $630 billion3 to responsible investments, which include low-carbon-oriented strategies that feature measurement and disclosure of a portfolio’s carbon footprint to help investors make decisions, for example, to hedge or engage.
Working collaboratively with HESTA, Russell Investments leveraged its expertise in factor-based investing to accurately identify the total carbon exposure in the portfolio as well as incorporate an assessment of potential stranded asset risk from carbon reserves. The resulting customised strategy has an objective to remain at or below 50% of benchmark carbon dioxide (CO2) emissions and carbon reserves in a risk-constrained manner. It also separately excludes all exposure to tobacco indicative of the firm’s ability to incorporate a range of considerations into a total risk-managed portfolio solution. To achieve this desired and more technical result, Russell Investments’ team devised a sophisticated measurement approach that considers carbon reserves and potential stranded assets in addition to the commonly considered carbon footprint of a company.
“Our deep experience and proprietary methodology in factor-based investing helped HESTA deliver a leading-edge investment strategy,” said Nicki Ashton, Russell Investments’ head of strategic partnerships for Australia. “This new quantitative equity solution met HESTA’s specific requirements, and we can apply the same expertise to provide similar customised solutions for a wide range of investment products, including centralised portfolio management, after-tax, single-factor, multi-factor, ESG and of course low-carbon.”
She added that the Customised Portfolio Services microsite serves as a repository for research, case studies and other information on a suite of more than 20 services that draw on the firm’s multi-asset capabilities. Each of these can be customised in combination or as individual services to deliver portfolio solutions for superannuation and investment funds to extend their in-house resources.
About Russell Investments
Russell Investments, a global asset manager, is one of only a few firms that offers actively managed multi-asset portfolios and services that include advice, investments and implementation. Russell Investments stands with institutional investors, financial advisors and individuals working with their advisors—using the firm’s core capabilities that extend across capital market insights, manager research, asset allocation, portfolio implementation and factor exposures— to help each achieve their desired investment outcomes.
Russell Investments has more than AUS$332.4 billion in assets under management (as of 31/12/2015) and works with more than 2,500 institutional clients, independent distribution partners and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell Investments has $2.4 trillion in assets under advisement (as of 31/12/2014). The firm has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell Investments also traded more than $1.7 trillion in 2014 through its implementation services business.
Headquartered in Seattle, Washington, Russell Investments operates globally, including through its offices in Seattle, New York, London, Paris, Amsterdam, Milan, Dubai, Sydney, Melbourne, Auckland, Seoul, Tokyo, Shanghai, Beijing, Toronto, Chicago and Milwaukee. For more information about how Russell Investments helps to improve financial security for people, visit https://russellinvestments.com/au or follow @Russell_News.
Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS Licence 247185 (RIM). This document provides general information only and has not prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation or needs. This information has been compiled from sources considered to be reliable, but is not guaranteed. Past performance is not a reliable indicator of future performance. Any potential investor should consider the latest product disclosure statement (PDS) in deciding whether to acquire or continue to hold an investment in any Russell product. The PDS can be obtained by visiting www.russellinvestments.com.au or calling (02) 9229 5111. RIM is part of Russell Investments. Russell Investments or its associates, officers or employees may have interests in the financial products referred to in this information by acting in various roles including as broker or adviser, and may receive fees, brokerage or commissions for acting in these capacities. In addition, Russell Investments or its associates, officers or employees may buy or sell the financial products as principal or agent.
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First Used: April 2016
1 Factors are specific, single attributes of investable securities, such as the security’s size, quality, or valuation. Understanding and actively managing these factors can both
potentially drive returns and manage risk within a portfolio.
2 In September 2014, the United Nations supported Principles for Responsible Investment launched the Montreal Carbon Pledge, which requires signatories to measure and disclose he carbon footprint of part or all of their equity portfolios. See www.montrealpledge.org. The Portfolio Decarbonisation Coalition (PDC), which requires signatories to also commit to ‘decarbonizing’ their portfolios in line with PDC guidelines, also was formed in 2014.
3 Responsible Investment Benchmark Report 2015, August 2015, Responsible Investment Association of Australia