- New fund reduces exposure to climate change risk, while maintaining global equity returns.
- Enhanced ‘green energy ratio’ directs investments towards green energy producers.
AUCKLAND, 24 October 2017 – Russell Investments today launched the Low Carbon Global Shares Fund, responding to client demand for a fund that supports management of climate-change risk and the transition to a low carbon economy. Designed with the firm’s proprietary ‘decarbonisation’ investment strategy, and reflecting the approach taken in existing bespoke institutional mandates, the Fund targets a reduction in carbon footprint and carbon reserves of 50%, relative to the MSCI ACWI benchmark (ex-Australia). It aims to maintain performance in line with that benchmark, with a low tracking error of less than 1%. It does this by avoiding the asset, sector and industry biases that can occur with a pure divestment approach.
“This rules-based solution is designed to help clients meaningfully reduce exposure to carbon-intensive holdings and invest more in carbon-friendly and renewable energy opportunities, all without materially affecting performance,” said James Harwood, portfolio manager, at Russell Investments. “We took a wide-lens approach when constructing this fund in order to substantially reduce the portfolio’s total exposure to carbon footprint and fossil fuel reserves and simultaneously avoid unintended consequences in terms of maintaining the integrity of the overarching asset class opportunity in developed and emerging markets.”
In taking a more comprehensive approach to reducing the carbon footprint of the portfolio, the Fund employs a ‘green energy ratio’, which looks at energy producers and calculates the percentage of total energy produced from green energy sources, scores each in a range from ‘entirely green’ to ‘no exposure to green energy sources’ and tilts the portfolio accordingly.
The Fund, which launches with NZD$378 million in seed money, also tilts toward those companies with positive environmental, social, and governance (ESG) characteristics more broadly, ensuring the final portfolio passes a ‘common sense’ test of what investors expect from a sustainable low carbon solution.
Mr Harwood added, “In line with Russell Investments’ ongoing sustainability research agenda, this fund’s strategy will be continually updated to reflect developing trends in the transition to a low carbon economy. In other words, this new fund’s strategy will offer interested clients a long-term solution, benefitting over time from our cutting-edge research, which will ensure it adapts to reflect changing market conditions within a risk controlled framework.”
The fund also excludes sectors which are excluded by other Russell Investments global funds offered in New Zealand: tobacco, cluster munitions, nuclear weapons componentry and anti-personnel mines.
“We’re delivering clients a globally diversified strategy that offers a meaningful reduction in carbon without sacrificing investment integrity,” said Auckland-based George Thomson, consultant, Russell Investments. “It’s exciting, we believe this level of sophistication in approach is unique to the New Zealand market.”
Russell Investments isn’t a newcomer to the global trend toward sustainable investing. The firm has been a signatory to the Principles for Responsible (PRI) Investment since 2009. In 2017, Russell Investments received an “A+” grade from the PRI, the highest possible, in the eight categories for which the firm reports data, encompassing strategy, governance, direct active management, manager selection, manager appointment, and manager monitoring.
Further, the Fund already has received certification by the Responsible Investment Association Australasia (RIAA)*, which signifies that a product or service offers an investment style that takes into account environmental, social, governance or ethical considerations. The RIAA symbol also signifies that Russell Investments has adopted strict disclosure practices required under the Responsible Investment Certification Program for the category of Fund Manager.
* Detailed information about the RIAA accreditation and Russell Investments methodology, performance and stock holdings can be found at www.responsibleinvestment.org, together with details about other responsible investment products certified by RIAA. The Responsible Investment Certification Program does not constitute financial product advice.
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. The firm has NZD$400 billion in assets under management (as of 30/9/2017) and works with more than 2,500 institutional clients, independent distribution partners and individual investors globally.
The firm has been a signatory to the United Nations’ Principles for Responsible Investment since 2009 and the Carbon Disclosure Project since 2010. The firm also is a member of the Institutional Investors Group on Climate Change (IIGCC) and the Investor Group on Climate Change.
Headquartered in Seattle, Washington, Russell Investments operates globally with 21 offices, providing investment services in the world’s major financial centers such as London, Paris, Amsterdam, Sydney, Tokyo, Shanghai, Toronto and New York. For more information about how Russell Investments helps to improve financial security for people, visit russellinvestments.com/nz.
The information contained in this publication was prepared by Russell Investment Group Limited on the basis of information available at the time of preparation. This publication provides general information only and should not be relied upon in making an investment decision. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant Russell Investments’ fund having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant Product Disclosure Statement or Information Memorandum prior to making an investment decision about a Russell Investments’ fund. The Product Disclosure Statements or the Information Memorandum for the Russell Investments’ funds (as applicable) are available by contacting Russell Investment Group Limited on 09 357 6633 or 0800 357 6633.
Copyright 2017 Russell Investment Group Limited. All rights reserved.
Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates, with a significant minority stake held by funds managed by Reverence Capital Partners. Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.