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Climate investments perform in volatile market: Deutsche report

Simulated portfolio shows performance factor in climate investments.

A global multi-asset portfolio with an allocation to climate-change-related investments would have outperformed one that was conventionally allocated over historical time frames, according to a new report by DB Climate Change Advisors, a unit of Deutsche Asset Management. A 6% climate-change allocation in a diversified global portfolio investing in public and private equity, fixed income and infrastructure would have returned 9.39% a year compared with 8.73% for a similar portfolio without the climate change investments, according to results that simulated probable distributions of returns over different historical periods. The simulated volatility of 11.3% for the portfolio with climate-change investments compared with 10.76% for the conventional portfolio, according to the 100-page
report: “Investing in Climate Change 2010: A Strategic Asset Allocation Perspective.” Over the three-year period starting Jan. 1, 2010, a portfolio with such a 6%allocation is forecast to produced an annual return of 9.11% with a volatility of 11.3%. “It’s now possible to say that even following extreme volatility in markets, investing in climate change produces outperformance,” Kevin Parker, member of the group executive committee, global head of asset management, Deutsche Asset Management, said in the report: “Our 2010 outlook is bullish for public markets, private equity/venture capital and infrastructure investments,” related to climate change, the report said.
Separately, a joint venture between Deutsche Bank and Masdar Venture Capital in Abu Dhabi has raised over $250m (€173m) for new investments in renewable energy. A total of $265 was raised for the DB Masdar Clean Tec, a joint venture between Deutsche and German technology group Siemens, a Deutsche client, which led the group of investors in the fund with a $50m allocation.
Barry B. Burr is the editorial page editor at Pensions & Investments