Donald Trump has pledged to rewrite the US policy playbook. Tax cuts, higher uniform tariffs and a transactional approach to foreign policy will influence equity markets worldwide. If domestic inflation rises, as many expect, the Federal Reserve will have less capacity to cut rates. This could be challenging for equities in general and some equity styles.

No matter what political changes lie ahead, we believe the transformation of the global economy to a net-zero model will continue, due to a combination of powerful economic factors, technological advancement and policy commitments. As a result, aligning clients’ portfolios to this transition now should still benefit them down the road, in our view. 

But progress will be bumpy. The return of a President who previously withdrew the US from the Paris Agreement serving as yet another reminder.
 

As TargetNetZero portfolio managers, it is our duty to make our strategies more resilient to changing market conditions while maintaining the goal of alignment to the Paris Agreement. To complement our primary driver of performance – market exposure to decarbonising companies in all industry sectors – in 2024 we introduced a new building block to our portfolio-construction process that aims to offset implementation costs. The ‘systematic alpha’ overlay assumes a level of risk specifically sized to meet this objective, seeking to support our main engine of performance and improve overall returns to clients.

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Adapting quickly to changing market environments, the overlay provides dynamic exposures to a broad range of equity styles across regions and sectors, based on a combination of momentum, macro, valuation and machine-learning signals. Such diversification enables our portfolios to adapt readily to market shifts, enabling them to become more resilient to economic and political shocks while keeping their net-zero objectives intact. 

Change is a certainty in 2025. Having the right tools to deploy is an important part of our approach, and we will continue to rigorously apply our process as we aim to provide truly diversified equity strategies for the transition to net zero.