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Multi-Factor Fund Addressing Climate Change Risk Launched By LGIM

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Multi-Factor Fund Addressing Climate Change Risk Launched By LGIM

The Future World Fund has been launched by Legal & General Investment Management (LGIM), a multi-factor global equities index fund that incorporates a climate ‘tilt’ to address the investment risks associated with climate change.

HSBC Bank UK Pension Scheme, one of the largest corporate pension funds in the UK, has selected the fund for its equity default option, worth £1.85 billion, in its DC scheme. In doing so, it becomes one of the first schemes to adopt a multi-factor investment strategy incorporating a degree of climate change protection as its default fund. Legal & General will also be investing its own capital in the fund.

The Fund, which tracks the FTSE All-World ex CW Climate Balanced Factor Index1, targets better long-term risk-adjusted equity returns than a traditional index strategy. It weights constituents according to certain ‘factors’ or attributes, rather than according to their size as with a conventional index. It also incorporates a ‘climate tilt’ to reduce exposure to companies with worse-than-average carbon emissions and fossil fuel assets, and increases exposure to companies that generate revenue from low-carbon opportunities.

Mark Zinkula, Chief Executive Officer at LGIM, commented: “The Future World Fund retains some of the transparency and low-cost characteristics of a conventional index fund, but also provides the opportunity to enhance investment returns by incorporating these factor tilts. Climate change related policies and new technologies will play an important role in shaping our future and the companies that are able to adapt should be well-placed to deliver returns. Pension fund trustees need to ensure they are able to offer better risk-adjusted returns while helping to manage climate change risk.”

We believe this fund will offer our members a better risk-adjusted return, incorporate greater climate change protection and deliver improved company engagement.

Mark Thompson, Chief Investment Officer at HSBC Bank UK Pension Scheme, says: “We believe this fund will offer our members a better risk-adjusted return, incorporate greater climate change protection and deliver improved company engagement. This is a mainstream fund, the new normal.”

Philip Hammond, Chancellor of the Exchequer, says: “Three of Britain’s biggest companies have come together for the launch of this ground-breaking new fund, which is a testament to our status as the world’s leading financial centre. Our ability to continually innovate means we are well positioned to benefit from the opportunities a growing green finance industry presents.”

Mark Makepeace, CEO of FTSE Russell, says, “FTSE Russell has a strong and long track record in the development of innovative ESG benchmarking tools and we are delighted that LGIM alongside HSBC have selected FTSE Russell as their index partner for this ground breaking new index and fund.”

LGIM GETS TOUGH ON ENGAGEMENT WITH CLIMATE IMPACT PLEDGE

Climate change has risen to the top of political, regulatory, and business agendas following the landmark Paris Agreement from the UN Climate Change Conference in 2015. The agreement, which came into force on 4 November 2016, is the first-ever universal, legally binding global climate deal and ensures carbon-reduction remains a top priority for governments and regulators in the years to come.

The Fund incorporates LGIM’s Climate Impact Pledge, in which LGIM commits to engage with the world’s largest companies that will need to adapt their business models and drive innovation in order to meet global climate change goals.

LGIM has identified the largest companies in six key sectors that it believes are pivotal to shift the market to a low carbon economy2. The Fund will divest from companies that fail to meet LGIM’s minimum criteria after an engagement period. LGIM believes this approach to engagement is a powerful tool to raise better corporate standards across the market and, in doing so, is stepping up its responsibility to help build a low carbon future to protect clients’ assets.

The increased attention on climate change has also influenced the attitudes of ordinary investors, according to a survey of pension scheme members by LGIM. The survey found that 81% of members voiced support for their corporate pension scheme to be invested in responsible companies, while an overwhelming majority (95%) said fund managers should be more active in helping to guide companies to be more responsible.

A large majority (86%) of respondents agree that managers should not jeopardise returns based on Environmental and Social Governance (ESG) considerations. The finding highlights the need to communicate to scheme members that ESG investment approaches have the potential to improve returns, rather than detract.

Economy

A Good Look At How Homes Will Become More Energy Efficient Soon

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energy efficient homes

Everyone always talks about ways they can save energy at home, but the tactics are old school. They’re only tweaking the way they do things at the moment. Sealing holes in your home isn’t exactly the next scientific breakthrough we’ve been waiting for.

There is some good news because technology is progressing quickly. Some tactics might not be brand new, but they’re becoming more popular. Here are a few things you should expect to see in homes all around the country within a few years.

1. The Rise Of Smart Windows

When you look at a window right now it’s just a pane of glass. In the future they’ll be controlled by microprocessors and sensors. They’ll change depending on the specific weather conditions directly outside.

If the sun disappears the shade will automatically adjust to let in more light. The exact opposite will happen when it’s sunny. These energy efficient windows will save everyone a huge amount of money.

2. A Better Way To Cool Roofs

If you wanted to cool a roof down today you would coat it with a material full of specialized pigments. This would allow roofs to deflect the sun and they’d absorb less heat in the process too.

Soon we’ll see the same thing being done, but it will be four times more effective. Roofs will never get too hot again. Anyone with a large roof is going to see a sharp decrease in their energy bills.

3. Low-E Windows Taking Over

It’s a mystery why these aren’t already extremely popular, but things are starting to change. Read low-E window replacement reviews and you’ll see everyone loves them because they’re extremely effective.

They’ll keep heat outside in summer or inside in winter. People don’t even have to buy new windows to enjoy the technology. All they’ll need is a low-E film to place over their current ones.

4. Magnets Will Cool Fridges

Refrigerators haven’t changed much in a very long time. They’re still using a vapor compression process that wastes energy while harming the environment. It won’t be long until they’ll be cooled using magnets instead.

The magnetocaloric effect is going to revolutionize cold food storage. The fluid these fridges are going to use will be water-based, which means the environment can rest easy and energy bills will drop.

5. Improving Our Current LEDs

Everyone who spent a lot of money on energy must have been very happy when LEDs became mainstream. Incandescent light bulbs belong in museums today because the new tech cut costs by up to 85 percent.

That doesn’t mean someone isn’t always trying to improve on an already great invention. The amount of lumens LEDs produce per watt isn’t great, but we’ve already found a way to increase it by 25 percent.

Maybe Homes Will Look Different Too

Do you think we’ll come up with new styles of homes that will take off? Surely it’s not out of the question. Everything inside homes seems to be changing for the better with each passing year. It’s going to continue doing so thanks to amazing inventors.

ShutterStock – Stock photo ID: 613912244

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Economy

IEMA Urge Government’s Industrial Strategy Skills Overhaul To Adopt A “Long View Approach”

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IEMA, in response to the launch of the Government’s Industrial Strategy Green Paper, have welcomed the focus on technical skills and education to boost “competence and capability” of tomorrow’s workforce.

Policy experts at the world’s leading professional association of Environment and Sustainability professionals has today welcomed Prime Minister Teresa May’s confirmation that an overhaul of technical education and skills will form a central part of the Plan for Britain – but warns the strategy must be one for the long term.

Martin Baxter, Chief Policy Advisor at IEMA said this morning that the approach and predicted investment in building a stronger technical skills portfolio to boost the UK’s productivity and economic resilience is positive, and presents an opportunity to drive the UK’s skills profile and commitment to sustainability outside of the EU.

Commenting on the launch of the Government’s Industrial Strategy Green Paper, Baxter said today:

“Government must use the Industrial Strategy as an opportunity to accelerate the UK’s transition to a low-carbon, resource efficient economy – one that is flexible and agile and which gives a progressive outlook for the UK’s future outside the EU.

We welcome the focus on skills and education, as it is vital that tomorrow’s workforce has the competence and capability to innovate and compete globally in high-value manufacturing and leading technology.

There is a real opportunity with the Industrial Strategy, and forthcoming 25 year Environment Plan and Carbon Emissions Reduction Plan, to set long-term economic and environmental outcomes which set the conditions to unlock investment, enhance natural capital and provide employment and export opportunities for UK business.

We will ensure that the Environment and Sustainability profession makes a positive contribution in responding to the Green Paper.”

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