The Schroder Global Climate Change Fund
With the Copenhagen Summit on climate Change James Davies, poses some questions to Simon Webber and Matt Franklin, managers of the Schroder Global Climate Change Fund, where the two took time to explain how they manage the UK’s oldest open ended fund.
The Schroder Global Climate Change Fund, which invests global equities to achieve its objective of long term capital growth, has delivered some impressive figures recently. The Fund seeks to identify companies that the managers believe will benefit from initiatives taken to mitigate the affects of climate change.
The fund is available through Chartwell Direct at 0% initial charge. You can invest by downloading an application form or logging into your Cofunds account online.
Alternatively, if you have any queries please do not hesitate to contact our Investment Helpdesk on 0117 9170777
What attracted you to managing a climate change fund?
We both believe that climate change is a defining issue of our time, and dealing with it is the crucial test of whether current human civilisation can peacefully sustain itself. So we consider it important that financial institutions start showing leadership to investors, creating products that will attract mainstream investors looking for good financial returns to invest in companies at the forefront of that transition.
To what extent would you agree with the charge that a climate change fund is high risk?
As with any fund, there will be certain stocks in the portfolio that carry slightly more risk than others. This should be expected, particularly in high growth industries where new technologies are constantly emerging and the speed of commercial application is less predictable and therefore profit growth less visible.
We have long recognised that climate change would have huge consequences for companies across a broad range of industries and affect a great many more companies than those purely involved in renewable energy, energy efficiency and environmental resources. As a consequence, our fund is much more broadly diversified than many other climate change funds, both by sector and geography. This feature serves to reduce the level of risk, particularly relative to many of the much narrower renewable energy funds.
In addition, we consider climate change and climate regulation to be one of the biggest emerging risks for many large companies across the market. Through our focus on this theme, we believe we have a superior understanding of the potential risks facing these companies, and are able to reflect this in our portfolio construction.
What makes you include a stock within your portfolio?
The fund delivers a focused exposure to the managers’ very best investment ideas selected from Schroders’ proprietary global climate change universe. This universe provides a unique filter capturing companies that are positively impacted by climate change which is expected to have a material positive impact on future earnings growth and therefore share price performance. The global climate change universe currently comprises in excess of 700 names from which a portfolio of 50-80 stocks are selected based upon an assessment of fundamental criteria including earnings growth, quality and valuation. Having met these criteria, stocks are ultimately selected because we believe they will outperform the broader marker.
What are the key themes/investment opportunities that you’re exploring within your fund at the moment?
The fund seeks to identify beneficiaries of climate change across 5 broad areas:
- Clean energy: wind, solar, hydro and nuclear
- Environmental resources: agricultural resources, forestry, water
- Low carbon fossil fuels: – natural gas, carbon capture and storage
- Sustainable transport: electric cars, rail and public transport
- Energy efficiency: – power management, smart metering, efficient materials, video conferencing
Details of the opportunities we see in each of the themes can be obtained from the monthly fund update.
Is an inter-governmental summit on climate change, like the one taking place in Copenhagen, capable of affecting real results, or has the power behind initiatives moved to a sub-national and corporate level?
Whether or not a comprehensive global agreement to address the causes of climate change is reached in Copenhagen, public and political attention have already increased substantially, highlighting the prospect of tougher regulation and policy in the future, and an increased focus on the impacts on corporate profitability and investment performance. Political momentum and policy action is only likely to accelerate as central authorities seek to address the need to reduce greenhouse gas emissions. This year Japan, the US, China, Brazil, and India, to name but a few, have all dramatically strengthened their commitment to tackling climate change. If nothing else, the Copenhagen conference will serve to raise awareness of the extent of the change needed if the world is to limit GHG emissions in order to avoid potentially catastrophic climate change, but the impetus for the continued growth and development of the green economy is already firmly in place.
- Simon Webber & Matt Franklin, managers of the Schroder Global Climate Change Fund
The views expressed by the fund managers were obtained by Chartwell on 9 December 2009 and are not necessarily the views of Chartwell Group Limited.