M&G Investment are taking the alignment with the Paris climate change goals head on with a range portfolios dedicated to fighting climate change.
M&G has dedicated funds forming a pincer movement on climate change.
On one side there are the funds such as the M&G Climate Solutions and M&G Positive Impact funs investing in companies already providing a measurable positive impact on the environment.
Supporting these efforts are M&G’s Paris aligned funds which invest in companies whose operations may not necessarily be directly reducing carbon emissions, but are minimising their impact and working towards net zero.
M& Investments offer two Paris Aligned funds in the M&G Global Sustain Paris Aligned Fund and M&G European Sustain Paris Aligned Fund. The two funds include holdings such as Microsoft, WH Smith, Novo Nordisk, Schneider Electric and Unilever.
There is a central theme within M&G’s sustainable-focused team that by seeking out companies with strategies aligned with Paris goals, they will discover high quality businesses that will produce attractive long term returns.
Having met with members of the team driving forward M&G’s Paris Aligned funds, there is a sense this school of thought is quickly moving through the organisation, beyond the funds dedicated to fighting climate change.
Weighted Average Carbon Intensity
Company selection for the Paris Aligned portfolio is dictated largely by the carbon intensity of the company. M&G aims for the overall portfolio to have a carbon intensity 50% below the benchmark average. If a company has a carbon intensity level above this 50% target, M&G expects the company has a science based target in place to help reduce carbon emissions.
Science based targets
A key feature of the M&G investment process is the presence of science based targets within the business. These targets provide the basis for assessing companies’ willingness to move towards Paris targets, even if they may not be operating in a sector that first springs to mind when selecting sustainable investments.
M&G say they expect in excess of 90% of portfolio companies will have science based targets in place by 2025.
Speaking at an investor event in June, Deputy Fund Manager of the M&G Global Sustain Paris Aligned Strategy, Mike Oliveros, drove home the rigorous selection process that sees very few changes to the Paris portfolios.
Engaging with companies is an integral part of their investment process. Oliveros noted that when they initially set about reaching out to companies they were often met with stoney faces, but are now enjoying high levels interaction.
Indeed, M&G highlighted they are actively engaged in influencing portfolio companies’ behaviour as they believe by doing this they will improve investment returns in the long term.
There is a belief that companies actively working to align their business models with Paris targets will outperform. This may be down to the ability to unlock value by providing low emission services that are set to enjoy increased future demand. It also means they could avoid financial penalties.