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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
Wellington supports the goal of net-zero greenhouse gas (GHG) portfolio emissions by 2050, in line with the objective to limit global warming to 1.5°C.
In December 2020, Wellington became a founding member and signatory to the Net Zero Asset Managers (NZAM) initiative. Grounded in our primary goal of achieving our clients’ investment objectives, this commitment aims to apply our research-led approach to better understand the impacts on our clients’ portfolios of the ongoing climate transition. It also helps us deepen our company research and enhance consultative partnerships with clients.
Aiming to achieve competitive long-term outcomes
Our core commitment is to aim to deliver superior investment results and exceptional service for our clients. Through our research partnership with Woodwell Climate Research Center, we have come to appreciate that the physical consequences of climate change will be felt sooner and be more disruptive than markets expect. As policymakers and markets increasingly recognize and respond to this, the transition to a low-carbon economy will gain momentum. As a result, we believe actively considering transition-risk management at the company and portfolio level can help us deliver better financial outcomes for our clients.
Companies will face many climate-transition-related challenges
To remain competitive, companies need to address transition risks that may affect asset valuations and risk profiles. New regulations and shifting consumer preferences away from high-emitting companies may lead to rising expenses and falling margins from carbon taxes, litigation fees, capital costs, and loss of business. We believe a credible decarbonization strategy will help attract stakeholders seeking to reallocate capital toward companies embracing the low-carbon transition.
As a signatory to NZAM, we commit to:
Importantly, the initiative “acknowledge[s] that the scope for asset managers to invest for net zero and to meet the commitments set forth above depends on the mandates agreed upon with clients and clients’ and managers’ regulatory environments. These commitments are made in the expectation that governments will follow through on their own commitments to ensure the objectives of the Paris Agreement are met, including increasing the ambition of their Nationally Determined Contributions, and in the context of our legal duties to clients and unless otherwise prohibited by applicable law.”2 The AUM that we commit over time will depend upon the net-zero commitments of our clients, alignment of those goals with the philosophy and process of the investment strategy, laws and regulations, and the availability of data and methodologies for additional asset classes. Figure 1 illustrates our approach.
1 Net Zero Asset Managers initiative | 2Net Zero Asset Managers initiative
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Physical climate risks: Implications for investors
Director of Climate Research Chris Goolgasian and Woodwell Climate Scientist Zach Zobel discuss how investors might use climate science as an input for financial decision-making.