Fulcrum Asset Management has made the strategic equity part of its flagship diversified absolute return strategy fully climate-aligned.
Approximately 10% of assets in the Diversified Absolute Return (DAR), Diversified Core Absolute Return (DCAR) and similar strategies, are now invested in companies whose past and potential emissions performance are deemed compatible with the goals of the Paris Agreement on climate change.
Fulcrum has achieved this by doubling internal allocations to its Fulcrum Climate Change (FCC) strategy.
This aims to only invest in stocks with an ‘implied temperature’ of below 2°C, while maintaining an average temperature below 1.5⁰C for the overall strategy.
This design feature has allowed the FCC strategy to retain its Article 9 status – the highest sustainability classification under the EU’s sustainable finance regulation – amid a wave of industry downgrades.
The FCC strategy provides a way for asset allocators to climate-align a major part of their equity allocation while maintaining a highly diversified exposure across sectors and regions.
Expanding climate team
Fulcrum has devoted increased resources to its climate-aligned investment capability, spanning data, research, and stewardship.
Between July 2022 and June 2023, the firm overall has cast more than 900 votes against directors at investee companies and over more than votes against pay packages, due to concerns around sustainability, for example, the lack of emissions targets.
With the formalisation of a climate research team in close collaboration with the investment team, Fulcrum has been developing methodologies and datasets on climate risks and opportunities.
A proprietary scoring framework for ‘principal adverse impacts’ on sustainability factors as well as various environmental metrics have been incorporated in the construction of the FCC strategy on the back of Fulcrum’s research objectives.
Fulcrum has also announced plans to submit its flagship strategy for certification as an Article 8 fund, designating funds that promote sustainability characteristics, and will continue to actively participate in several industry working groups to help advance the conversation on portfolio alignment and asset classes such as derivatives.
Matt Roberts, partner at Fulcrum Asset Management and chair of Fulcrum’s responsible investment committee, said: “Aligning our strategic equity component with the goals of the Paris Agreement has been a huge piece of work across our teams.
“We launched our Fulcrum Climate Change strategy a little over three years ago now and integrating that equity exposure into our core diversified strategies (DAR and DCAR) has been a natural next step.”