investment viewpoints

Finding the value in high-carbon sectors

Finding the value in high-carbon sectors
Alexey Medvedev, PhD - Portfolio Manager

Alexey Medvedev, PhD

Portfolio Manager




Need to know

  • Our TargetNetZero portfolios leverage an in-house methodology for measuring the alignment of companies to the climate transition
  • In this note we try to gauge the performance implications of our approach by backtesting a hypothetical portfolio
  • The findings support our conviction that the commitment to decarbonisation must be rewarded, particularly among high emitters. This is at the core of our TargetNetZero portfolios designed to benefit from a shift in relative valuations


Encouraging findings

The transition to net-zero greenhouse gas emissions will require radical changes to the global economy. Investors must position their portfolios to support this transition and to benefit from it.

Our TargetNetZero portfolios leverage a methodology developed by our sustainability research team – allowing us to evaluate the alignment of companies in our investment universe to the transition in the form of the implied temperature rise (ITR).

Finding evidence to support our conviction is not an easy task. The climate transition is at an early stage, so the strategy has yet to show its full potential. In addition, being of a quantamental nature, the ITR methodology is conceptually difficult to backtest.

Nevertheless, we have tried to measure the performance implications of our approach by looking at the pure `systematic core’ of the underlying methodology. While this analysis cannot be considered a full-scale backtest, the results are quite encouraging.

To read our full paper, use the download button provided.

important information.


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