The company says climate change is a serious issue, with policies and regulations being put into place around the world to tackle it. According to Schroders, this is driving investment into certain industries and companies in those sectors will benefit.
The fund will invest globally in companies that are involved in mitigating or adapting to climate change. Mitigation refers to things that can be done to prevent the worst of future climate change, such as reducing energy wastage and decreasing dependence on coal and oil. One example of an investment idea is companies involved in developing new technology to reduce greenhouse gas emissions.
Adaptation refers to the need for people to adapt to the consequences of climate change that cannot be avoided. One example is constructing buildings that can withstand more extreme weather conditions.
The fund invests in a best ideas portfolio of 50-100 companies drawn from a universe of around 500. It will be benchmarked against the MSCI World Index, but managers Simon Webber and Matthew Franklin will not be constrained by benchmark weightings. Webber and Franklin already co-manage the Schroder ISF global climate change equity fund, which has a similar policy to this fund. They will be supported by four global sector specialists, two climate change specialists and 60 in-house analysts based around the world.
The fund will invest across regions, business sectors and sizes in relation to five investment themes – energy efficiency, low carbon fossil fuels, clean energy, sustainable transport and environmental resources.
Although the fund focuses on climate change, it is not an ethical fund, so stock selection will not be based on ethical criteria. Webber and Franklin will look for companies experiencing increased demand for their products and services as a result of climate change, or those that are industry leaders The management of the companies will address climate change through company policy.
Schroders believes it will benefit by investing in companies that are addressing climate change, as these are potentially the winners of tomorrow. It will not invest companies that are ignoring climate change or those where climate change will put pressure on costs and demand for products. However, some companies at the forefront of tackling climate change are small and a high proportion of such companies could increase the risk in the portfolio.