Global investment manager GMO has announced the launch of the GMO Horizons Investment Fund.
The firm writes that investors are currently facing difficulty navigating the risks that climate change poses to portfolio returns. In response, GMO writes that it has created a global strategy that seeks to address emissions risk while also harnessing opportunities that help mitigate climate change by seeking exposure to green products and services. The fund launch underscores GMO’s dedication to providing sustainable investment solutions.
The fund’s strategy is designed to deliver two key benefits for investors:
Climate Transition Risk Reduction: The fund aims to reduce total portfolio emissions, utilising GMO’s proprietary research into emissions risks embodied in company value chains. GMO’s Indirect Emissions Model addresses the shortcomings of reported scope 3 data, allowing the portfolio to target 50 per cent fewer total emissions than the MSCI ACWI ex Fossil Fuels Index.
Exposure to Climate Opportunities: The fund targets green revenues of at least three times higher than the benchmark, currently 27 per cent for the portfolio vs. 9 per cent for the benchmark, leveraging a green revenue data set that captures a wide range of green products and services across the investable universe.
“We believe Horizons’ dual objective of reducing total portfolio emissions and increasing exposure to climate opportunities is a unique and comprehensive investment solution in the sustainability space. The fund represents a low-cost systematic alternative to passive equity investment, avoiding the industry concentration risks and unintended factor exposures found in other offerings in the market,” says George Sakoulis, Head of Investment Teams and Lead Portfolio Manager on the GMO Horizons Strategy.
The GMO Horizons Investment Fund is a global portfolio reflecting the view that the world economy is transitioning to a lower carbon future and that this process will create opportunities for investors to seek excess returns. The fund seeks to capture these opportunities and mitigate related risks through reduced total emissions intensity (direct and indirect) and significant exposure to impactful climate solutions while controlling for exposure to ESG risks.
The GMO Horizons Investment Fund is a fully systematic and diversified solution that is designed to provide:
Materially lower total emissions than the MSCI ACWI ex-Fossil Fuels Index as measured using scope 1 emissions and GMO’s proprietary Indirect Emissions model, which estimates the indirect emissions embodied in end-to-end company value chains.
High levels of exposure to companies where revenue is derived from selling green products and services.
ESG risk mitigation via better ESG characteristics than the benchmark.
