Responsible Investor

Schroders heralds the changing investment climate

CIO Alan Brown says fund managers will also come under pressure on their own internal environment policy.

Alan Brown, chief investment officer at Schroders, the £137.6bn ($197bn) UK fund manager, believes the company’s newly launched Global Climate Change Fund, could take in over a billion US dollars by this time next year. His confidence is a sign mainstream asset managers believe climate change is a serious investment proposition.
The fund, which already runs assets close to $300m (€210m), launched at the end of June in Hong Kong, then Singapore, Japan and in the UK in September.
Targeting retail investors to begin with, Brown says the company has also met with institutional clients interested in its long-term outlook. Schroders says the fund is the first in the UK giving investors exposure to a global portfolio of companies involved in mitigation of or adaptation to the effects of climate change. It aims to beat the MSCI World Index over a two-year time frame through investing in a concentrated portfolio of 50 to 80 stocks. Brown, a respected strategic thinker, believes climate change has brought about a fundamental shift in investment prospects.

“Most of the early studies showed that if you applied an investment screen for environmental issues then the company performance over a number of years did better than the market average. But the research was bad. It was riddled with things that no academic should let through: look-back bias, no adjustment for all the industries they’d taken out and size effects, etc. Then in about 1991, some academics from the Netherlands, including Rob Bauer formerly of ABP, did some really good work on performance attribution using a data set from Innovest, which carefully accounted for all the industry sizes and companies removed. The residual performance was still positive. However, being the good academic he is, Bauer acknowledged that it was a period-specific result.
“We now believe the climate change theme is so fundamental that it is going to lead to a huge re-investment in new technologies and new businesses as we seek to mitigate and adapt to climate change, and that these are nothing like discounted at the moment. Some companies will be relatively advantaged because

Not a member? Register here »