Overview
Following an introduction by Jeremy Grantham, the GMO Horizons team discussed how the Horizons Strategy provides a core sustainable solution that reduces total portfolio emissions using our proprietary Indirect Emissions model and capitalizes on long-term growth in the green economy.
During the webcast, our team detailed how GMO Horizons addresses the problem of scope 3 data and captures climate investment opportunities while neutralizing country, sector, and style exposures typically associated with sustainable investing.
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Key Points
- Jeremy Grantham shared his view that institutional investors need to address climate change.
- GMO Horizons manages total emissions risk using the GMO Indirect Emissions model, while other available solutions that focus on scope 1 and scope 2 emissions are missing emissions embodied in company value chains.
- GMO Horizons gives investors exposure to products and services that aid in the transition to a more sustainable economy without taking unnecessary career risk, style tilts, or tracking error, versus the MSCI ACWI index.
Q&A HIGHLIGHTS
Below are select participant questions answered live during the webcast. Please refer to the event replay for full Q&A.
1. What makes you confident in the FTSE Green Revenue dataset?
Features of the FTSE green revenue dataset that give us confidence include: Taxonomy alignment with the EU Environmental Objectives, with expanded objectives to provide a more complete solution.
- Each company has a very detailed breakdown of green revenues to the microsector level.
- Tier classifications of each microsector’s environmental impact allow us to tilt the portfolio toward tier 1, high impact, microsectors.
2. How did you decide on 3x green revenue?
One of the most interesting aspects of building the GMO Horizons Strategy was balancing the trade-offs between increasing green revenue exposure, lowering the total emissions footprint, and minimizing the tracking error relative to the MSCI ACWI index. We have found that the current parameters, including 3x green revenue and 50% of index level total emissions, provide an attractive balance between financial and sustainability objectives.
3. What subsectors of energy is GMO Horizons Strategy holding, given the emissions target and this being a naturally high emissions sector?
While we tend to underweight the Energy sector, due to its relatively high emissions footprint, we are overweight Oil & Gas Equipment & Services, because it provides exposure to green revenue opportunities and has the lowest total emissions footprint of the Energy sub-industries.
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