Climate change is an investment problem that needs active management rather than index-based solutions, according to Aviva Investors Australasia head, Brett Jackson.
Jackson said passive investment styles fail to address the complex real climate change challenges that require engagement with companies, regulators and governments.
“People are starting to realise that we can only help companies meet science-based climate change targets through active management,” he said. “Just excluding emitters won’t help at all as other less-engaged investors will own those companies.”
In March this year parent company, the UK-headquartered insurance giant Aviva, agreed to sign-up to the Science Based Targets Initiative – a collective of global organsations including the UN and the World Wide Fund for Nature – as part of its plan to hit net zero carbon targets by 2040.
Aviva said in a release that the move marked the first commitment to the 2040 goal by a major insurer.
“The undertaking, which will inform every aspect of operations and investment decisions at Aviva…,” the statement says.
Amanda Blanc, the recently appointed Aviva chief, said the net zero target required “leadership and radical ambition” with the effort covering “every aspect of operations and investment decisions” at the firm.
“Aviva is taking further action on coal immediately,” the statement says. “By the end of 2022 it will divest from all companies which make more than 5% of their revenue from coal unless they have signed up to the Science Based Targets initiative.”
Earlier in January this year, Aviva Investors upped its climate change game with an engagement program with the “30 systemically important carbon emitters in the oil and gas, metals and mining, and utilities sectors” across its portfolio.
“If Aviva Investors does not see evidence of serious engagement from the companies to meet the climate challenge, it will put them on its stop-list and divest itself of any assets it holds,” the release says.
But the strategy also involves allocating more to ‘green’ investments and applying the climate change lens across the “main asset classes of its core markets: credit, equities, direct real estate and sovereign debt (for which the methodology is being developed this year)”.
“… Aviva will be able to expand this further as data and methodologies become available,” the statement says.
The ambitious targets require the support of a well-resourced environmental, social and governance (ESG) in-house team, headed by Steve Waygood, and the global Aviva investment expertise, Jackson said.
While the net zero goal applies across the board at Aviva, he said the firm had also developed dedicated ESG strategies such as the recently launched Climate Transition Global Equity Fund.
“To date there’s been a lack of product to tackle the climate transition issue despite growing demand from investors,” Jackson said.
He said Aviva released an Australian “feeder fund” last November that flows into the European-domiciled global equities climate transition vehicle.
“We’ve had positive response from investors in Australia and NZ,” Jackson said.
Aviva is principally a wholesale and institutional manager in Australia and NZ with the climate transition fund set at a A$500,000 minimum investment. Better-known across the Tasman, Aviva manages over A$1 billion in funds on behalf of Australasian clients.
“We’re looking to build more relationships with NZ investors,” Jackson said.
And last week a local retail manager, the just-restructured Pathfinder, revealed plans to scrub carbon from its KiwiSaver funds and two other products.
The Pathfinder KiwiSaver scheme (previously known as CareSaver) would be the first in the sector to go carbon-neutral, according to chief executive, John Berry.
Berry said in a release the zero-carbon approach was “what our investors want and what the world needs right now”.
Paul Brownsey, Pathfinder chief investment officer, said the manager previously minimised carbon exposure in its portfolios through active strategies.
“But that doesn’t go far enough, so we’re now using audited carbon credits to further reduce the emissions of our portfolio to a net negative position,” Brownsey said.