Baillie Gifford: 25% of clients explicitly want net zero

Baillie Gifford Head of Climate Change Caroline Cook

Edinburgh fund management giant Baillie Gifford has revealed that 25% of the money the firm invests is now entrusted to it “by clients who wish us to manage it in a way that explicitly supports the delivery of global net zero greenhouse gas emissions by 2050.”

Baillie Gifford said this proportion has risen a quarter, from 20%, over the last year.

“It represents a growing partnership with clients who have asked us to deliver both long-term investment returns and a genuine contribution to the chances of a successful climate outcome,” said Baillie Gifford’s Head of Climate Change Caroline Cook.

“Given today’s challenges in delivering rapid decarbonisation, living up to our clients’ wishes poses real complexity.

“Quick and easy fixes won’t work. Open conversations and adjustments will be required as the transition unfolds.

“But our determination to try is grounded in a belief that a successful transition that keeps increases in global temperatures to below 2C, and ideally to 1.5C this century, offers our clients a better opportunity for strong long-term investment returns than a failed transition, as described in our statement of climate-related intent and ambition.

“We take to the challenge knowing that the world’s path to climate success is not pre-set.

“We don’t know how society, technology, and the climate will evolve and combine to create the necessary solutions.

“But, as active investors of generally concentrated equity portfolios, we aim to bring fundamental, bottom-up analysis to bear on the companies we invest in and the uncertainties ahead.”

Baillie Gifford had around £217 billion under management and advice as at November 15, 2023.

“The sheer scale of the innovation and change underway makes the climate transition a material investment factor across the funds we manage for all clients,” added Cook.

“Combining new energy technologies with the global climate response creates huge shifts in capital and investment.

“We want to understand how companies are preparing and managing the associated risks. We want to find those that are creating new competitive advantages.

“Such opportunities will be obvious for some companies, but for others, those emergent but impactful products, supply chains, or customer relationships will take deeper research and engagement. We want to find such opportunities to deliver great long-term investment returns.

“Among those seeking to create new products to lead global decarbonisation, our portfolios include companies such as Tesla and NIO (electric vehicles), CATL and Northvolt (batteries), SolarEdge and Vestas (solar and wind), Ginkgo (synthetic biology) and many more.

“We also hold decarbonisation evolvers. These are companies finding new investment opportunities and new customers by aligning their businesses with the transition.

“Our portfolios feature leaders as diverse as CRH and Cemex (cement), Ryanair (airlines), Analog Devices (smart electrification), Microsoft (low-carbon computing), Netflix (positive programming), BioNTech (vaccines) and more.

“We have an expanding range of funds with clear commitments for the growing proportion of clients who wish us to work in a way that explicitly reinforces the drive for a successful climate outcome.

“Right now, these sit across eight fund families, including full mainstream strategies (LTGG1, our Europe and UK portfolios and the Managed Fund), sub-variants (Global Alpha Choice, Global Alpha Paris-Aligned and Responsible Global Equity Income) and our sustainable and impact strategies (Sustainable Growth and Positive Change).

“Beyond the awareness of transition materiality that we provide for all the assets we manage, these net zero committed funds work consciously to support climate leadership across their portfolios. The funds’ investment beliefs expect financial advantage to accrue to well-prepared companies who can create positive climate impact.

“They encourage company management to set ambitious strategies to manage their emissions and look for those enabling the creation and adoption of climate solutions.

“When the funds prioritise their engagement, they take a whole-of-society approach to potential climate impact: timely success will need all companies, almost regardless of sector, to bring their most material contributions.

“In pursuing these fund goals, we know that the proof points for net zero committed funds are difficult to express. The benchmark is the aspiration of the Paris Agreement: to try to halve global emissions by 2030 and reach net zero by 2050.

“But underneath that simple headline lies the complexity of many different regions, industries and companies all having slightly different abilities to deliver – and changing opportunities to do so as technologies evolve and policies fluctuate.”