November 18, 2020

“Many investors are not yet equipped to invest in a decarbonising economy and don’t even know where to start. Our analytics and advice help all investors transition their portfolios to address the challenges of managing climate risk, meeting return objectives while staying on target for a net-zero outcome.”

– Helga Birgden, Global Leader Responsible Investment

Institutional investors such as pension funds, financial institutions, insurers, wealth managers, endowments and foundations, hold trillions of dollars in assets1 in their portfolios that are highly exposed to climate transition risk in a decarbonising economy. If investors do nothing to address this issue today, climate change could reduce their ability to deliver on investment promises such as pension payments. We believe that now is the time for investors to reposition portfolios for the transition to a zero-emission economy. Mercer’s analytics help investors assess their investments by categorising the portfolio on a spectrum — going from “grey” or high-carbon, low-transition investments to those that are already low-/zero-carbon or are climate solutions — “green” investments. Many companies lie in the middle, and these also need to be assessed on their capacity for transition in the future.

 

We help clients:

  • Calculate the current emissions baseline for your total portfolio
  • Analyse possibilities for emissions reductions and transition
  • Set targets for multiple timeframes and a plan to execute with confidence
  • Implement a transition plan by asset class, employing integration, stewardship and investment strategies

 

Why we all need a transition plan

The scientific evidence shows the situation is urgent. We’ve already had a 1°C increase in average global temperatures over preindustrial times. According to current science1, we could be facing a 2°C increase in as few as 30 years — a climate humans have never experienced. As a result, investors should educate themselves on the downside risks they face because of the transition — as well as potential opportunities to benefit from it. In particular, many companies, investors and governments have announced alignment with the targets of the 2015 Paris Agreement, including taking measures to prevent temperatures from increasing past the 1.5ᵒC threshold2.

 

Addressing climate change requires reducing fossil fuel emissions. Studies indicate that the transition to a low carbon economy is already underway3. Consider how technology has driven down the cost of renewables. 2019 was the fifth year in a row in which renewable capacity additions, outstripped additions from fossil fuels and nuclear combined, for example, NextEra Energy now has a larger market capitalisation than ExxonMobil.

 

As investors, we need to try to assess companies’ ability or willingness to transition toward limiting global temperature increases and how well-positioned they are for the low-carbon economy. To make a proper assessment, we need to get serious about the risks. One of the key findings of our Investing in a Time of Climate Change — The Sequel report was that investors should position for a below 2ᵒC scenario, which we believe will offer improved investor outcomes.

 

Setting your transition pathway — doing your bit, your way

Regardless of your size or where you are on your climate change journey, your exposure to the climate transition is likely to impact your portfolio. We work with clients of all shapes and sizes, helping them assess portfolio opportunities, establish targets and produce implementation plans that can be integrated with strategy and portfolio construction decisions.

 

Our new Analytics for Climate Transition (ACT) can help you set your transition pathway. We help you to assess your portfolio using metrics from numerous providers to gain insight into your portfolio across a spectrum of carbon risk from low transition capacity (grey investments), through to investments that are low carbon risk /zero carbon already, or those that are providing climate solutions (green investments). The majority of companies in investor portfolios fall somewhere in between and need to be understood for their capacity to transition. The Mercer analysis will help you to rank the transition capacity of listed companies in your portfolio, across the spectrum from grey to green.

 

Your total portfolio view will provide baseline results for multiple asset classes. You’ll be able to drill down into manager portfolios that are driving asset-class results. This insight will help you determine where your current carbon emissions are in the portfolio and where you can make reductions. It will also help determine where to focus your efforts with sectors and companies to improve transition capacity and increase your exposure to green solutions.   

 

Connect with us today

Connect with one of our experts below, or fill in the contact form to learn how we can help you on your energy transition pathway.

Helga Birgden
Global Business Leader, Responsible Investments, Melbourne 

Helga provides investment advice on ESG and climate change in complex assignments to trustees, directors and investment boards of pension funds, sovereign wealth funds, endowments and insurers. She leads Mercer’s global Responsible Investment Team. Helga helped lead Mercer’s global climate change studies and portfolio modeling for climate implementation — Investing in a Time of Climate Change (2011 and 2015) and The Sequel (2019) — representing client portfolios investing more than US$3 trillion. She has recently authored a book chapter on climate modeling published by Routledge (2020), is Deputy Chair of the Investor Group on Climate Change and is also active as an advisor on responsible investment issues. She has prepared research on both climate change and systemic issues for multilateral institutions such as the World Economic Forum, International Finance Corporation, World Bank Group, G20 and the United Nations. 

Jillian Reid
Senior Responsible Investment Specialist 

Jillian advises super funds and other institutional investors on integrating ESG factors, sustainability trends, climate change and stewardship within investment processes. She is a key contributor in developing Mercer’s intellectual capital and integrating responsible investment within Mercer globally, including within the delegated solutions. Jillian was project manager and co-author for Mercer’s 2015 Investing in a Time of Climate Change report and The Sequel in 2019. She has written and presented on water — too much and too little — and helped multiple boards balance risk, return and reputation implications for sensitive investment topics.

Nick White
Global Strategic Research Director, Sydney 

Nick has responsibility for house views on multi-asset-class research and portfolio construction, as well as the development of the strategic research agenda. Nick’s role extends to contributing to strategic policy decisions for the suite of Mercer funds in the Pacific market. This aspect of his role formally links Mercer’s strategic best ideas and forward-thinking research to building discretionary portfolios, ensuring Mercer’s best ideas are mapped to all clients’ advice and funds. 

Kate Brett
Business Leader, Responsible Investments, Europe 

Business Leader, Responsible Investments, EuropeKate works with clients to ensure sustainability and ESG issues are reflected in their investment strategies. Kate advises a broad range of clients, including pension funds, endowments, foundations and insurers on sustainability trends, regulatory developments, climate change, stewardship and impact investing.

Kate develops intellectual capital across a range of responsible investment topics. She has authored and co-authored several recent reports and papers, including Investing in a Time of Climate Change (2015) and The Sequel (2019) and Resilience: Lessons to Scale Responsible Investment (2020) in partnership with the UK-China Green Finance Centre.

Kylie Willment
Chief investment officer, Pacific

Kylie leads the Investment Management team in the Pacific which is responsible for managing approximately A$41 billion in assets within Mercer’s multi-manager funds. Kylie also Co-Chairs the Global Delegated Solutions ESG Integration Committee where she leads investment thought leadership for Mercer funds globally on ESG integration and investment stewardship. Kylie’s strong focus on sustainability has led her team of investment experts to embed a holistic approach to ESG integration into investment strategy and decision making for superior client investment outcomes. Further, Kylie has led the development of certified socially responsible fund offerings for clients. Amongst key areas of sustainability focus, Kylie has led the funds response to Task Force on Climate-related Financial disclosures (TCFD) recommendations, Australian Modern Slavery Act as well as global ESG engagement priorities including diversity and corporate governance. The efforts of the team and Mercer’s mission were recently rewarded with the top accolade for responsible investment strategy and governance by the PRI.

Important information

1. Mercer. Investing in a Time of Climate Change — The Sequel, 2019.

 

References to Mercer shall be construed to include Mercer LLC and/or its associated companies.
© 2020 Mercer LLC. All rights reserved.

This contains confidential and proprietary information of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity without Mercer's prior written permission.

Mercer does not provide tax or legal advice. You should contact your tax advisor, accountant and/or attorney before making any decisions with tax or legal implications.

This does not constitute an offer to purchase or sell any securities.

The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed.

For Mercer’s conflict of interest disclosures, contact your Mercer representative or see http://www.mercer.com/conflictsofinterest.

This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this information without first obtaining appropriate professional advice and considering your circumstances.  Mercer provides recommendations based on the particular client's circumstances, investment objectives and needs.  As such, investment results will vary and actual results may differ materially.

Information contained herein may have been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission or inaccuracy in the data supplied by any third party.

Investment management and advisory services for U.S. clients are provided by Mercer Investments LLC (Mercer Investments). Mercer Investments LLC is registered to do business as “Mercer Investment Advisers LLC” in the following states: Arizona, California, Florida, Illinois, Kentucky, New Jersey, North Carolina, Oklahoma, Pennsylvania, Texas, and West Virginia; as “Mercer Investments LLC (Delaware)” in Georgia; as “Mercer Investments LLC of Delaware” in Louisiana; and “Mercer Investments LLC, a limited liability company of Delaware” in Oregon.  Mercer Investments LLC is a federally registered investment adviser under the Investment Advisers Act of 1940, as amended. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Mercer Investments’ Form ADV Part 2A & 2B can be obtained by written request directed to:  Compliance Department, Mercer Investments, 99 High Street, Boston, MA 02110.

Not all services mentioned are available in all jurisdictions. Please contact your Mercer representative for more information.

 

Certain regulated services in Europe are provided by Mercer Global Investments Europe Limited, Mercer (Ireland) Limited, Mercer Limited and Mercer Alternatives AG. Mercer Global Investments Europe Limited and Mercer (Ireland) Limited are regulated by the Central Bank of Ireland under the European Union (Markets in Financial Instruments) Regulation 2017, as an investment firm.  Registered officer: Charlotte House, Charlemont Street, Dublin 2, Ireland.  Registered in Ireland No. 416688.  Directors: Sylvia Cronin, Michael Dempsey, Tom Geraghty, Abhishek Krishan, Deborah Mintern, Bruce Rigby (British) and Vincent Sheridan. Mercer Limited is authorized and regulated by the Financial Conduct Authority. Registered in England and Wales No. 984275. Registered Office: 1 Tower Place West, Tower Place, London EC3R 5BU. Mercer Alternatives AG is registered with the Swiss Financial Market Supervisory Authority (FINMA) to act as a supervised asset manager for collective investment schemes as well as a licensed distributor and representative for its own foreign collective investment schemes.

Investment management services for Canadian investors are provided by Mercer Global Investments Canada Limited.  Investment consulting services for Canadian investors are provided by Mercer (Canada) Limited.

Speak with a Mercer Consultant

To learn more about Mercer's Wealth and Investment services and solutions complete the form below and a Mercer Consultant will be in contact with you.

*Required Fields

We're Here to Help