Industry super fund-owned investment manager IFM Investors has launched a new Climate Transition Fund for ASX-listed equities to help support the net zero ambitions of institutional investors.
The fund will initially target a 50 per cent reduction in both scope 1 emissions that occur from sources that are owned or controlled by a company and scope 2 emissions that cover indirect emissions from the generation of purchased energy by 2030 from a 2019 benchmark.
IFM said it aimed to work towards these targets, as well as a reduction in scope 3 emissions that cover all of the indirect emissions outside of a company’s control including from their suppliers, by reducing exposure to carbon-intensive companies and by taking overweight positions in companies that are involved in clean energy and climate-transition solutions.
“We created the climate transition fund to help institutional investors – such as super funds and endowment groups – reduce their carbon exposure while still ticking the right boxes in terms of risk, fees and performance,” said IFM Investors executive director, index and quantitative equities, Laurence Irlicht.
According to IFM, the fund will provide investors with a low-risk strategy that benchmarks the ASX 300 with the aim of aligning with the performance requirements introduced under Your Future, Your Super.
The investment manager expects that the fund may appeal to investors looking to decarbonise their Australian equities portfolios and reduce climate risk without taking on significant tracking error and fees. One unnamed industry super fund has already joined as a seed investor.
“Investors shouldn’t have to choose between their tracking error budgets and climate objectives,” commented Mr Irlicht.
“Our Climate Transition Fund demonstrates that a modest amount of tracking error can drive a reduction in carbon exposure over time and help direct capital towards companies developing climate solutions.”
Through its investment approach, IFM will take into account the transition capabilities and risks of companies while engaging with those that are deemed to have high transition risk.
The fund is also not limited to investing in companies only within the ASX 300 if there are appropriate opportunities to help to facilitate a faster transition to net zero outside the index.
IFM said that, as part of the fund’s investment strategy, it would leverage its scale as one of the country’s largest equity managers to actively engage with companies and advocate for greater corporate accountability and positive climate outcomes.
As of the end of March, IFM had $181 billion under management, including $45.5 billion in listed equities on behalf of institutional investors.
In October 2020, the investment manager pledged to reach net zero by 2050.
