We have identified a number of risks and opportunities that arise in our investment strategies, as outlined below.
For our Global Equity Strategy portfolios, which are broad-based equity portfolios seeking to outperform broad equity market benchmarks, climate change related risks exist in many industry sectors, including (but not limited to) utilities, energy, financial services (particularly insurance), transportation and materials. In most cases, companies in these sectors are at significant risk of being adversely impacted by regulatory and similar pressures to reduce greenhouse gas emissions, which may reduce future profitability and/or require significant changes to the companies' business model. In other cases, there are significant physical risks (e.g. insurance companies which have exposure to rising sea-levels).
The Global Equity Strategy portfolios also have actual or potential investments in companies which have opportunities to grow their business, and their earnings, as a result of climate change. Examples include companies which are providing products or services in the area of climate change mitigation or adaptation, such as renewable energy utilities. In some cases, e.g. auto companies, the same companies face both opportunities and risks.
For our Natural Resources equity strategies, we have identified many companies with climate-related opportunities. Our Energy Solutions strategy, in particular, invests only in companies which provide solutions to the scarcity of clean energy, but our Water and Agribusiness and our Sustainable Infrastructure strategies also invest in several companies which are well placed to benefit from the opportunities arising from climate change. We have also identified companies held in our Natural Resources strategies which face climate-related risks. Typically, the companies in which we invest for these strategies are not exposed to substantial risk from the need to reduce their own greenhouse gas emissions (due to the nature of their business activities) but some companies, for example companies which own farmland, are exposed to unclear physical risks from climate change, such as increased flooding or drought. Other companies face indirect risks, for example they may supply goods or technical services to a sector which in turn faces the need to change its fundamental business model due to climate change.