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Finance day at COP26: How Witan is evolving its thinking

Glasgow is currently hosting the 26th UN Climate Change Conference of the Parties or COP26 as it is more commonly known. It runs from 31 October – 12 November 2021 and is designed to bring together parties to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.

The UK is committed to working with all countries and joining forces with civil society, companies and people on the frontline of climate change to inspire climate action ahead of COP26.

With such commitment from our government and those around the globe, James Hart our Investment Director shares his thoughts on the road to Net Zero and what it means for us:

“The fight against climate change is now central to the geopolitical agenda and is rapidly becoming a key consideration for financial institutions and investment companies, such as us at Witan.

We have devoted significant resources to our engagement on this subject, both before and since becoming a member of the Institutional Investors Group on Climate Change (IIGCC) in 2019 and a supporter of the Transition Pathway Initiative in 2021. One of the recent areas of engagement with our managers is how they and their portfolio companies are assessing the challenges and opportunities of meeting the targets set by the Paris Agreement in 2015. We believe reaching Net Zero by 2050 is key to the long-term sustainability of our planet and will require significant investment. This is why we recently signed the 2021 Global Investor Statement to Governments on the Climate Crisis, which calls on governments to implement the essential policy framework to help investors contribute to this goal.

We and the fund managers that manage money on our behalf take a holistic approach to responsible investment and so consider the whole value chain as well as the long journey to Net Zero. Whilst we own a number of clean energy companies in the portfolio, we will own companies which may not ‘score’ well on backward looking ESG metrics but are an integral part of the solution to whichever issue is being addressed. These companies produce materials, components or technologies which are essential to the transition and are therefore likely to benefit financially from the efforts to mitigate or adapt to ESG issues.

Taking climate change as an example, we believe that a blunt exclusion policy to ‘greenwash’ a portfolio runs counter to meeting the goals set by the Paris Agreement and is likely to be detrimental to shareholder returns. Therefore, in addition to investments in Climate Change and Renewable Energy strategies (totalling over 5% of assets), our portfolio may contain mining companies (copper for electrification or nickel for battery storage), steel manufacturers (to make wind turbine towers or electric grids), paper and packaging companies (to address overuse of single-use plastics) and aerospace manufacturers (developing fuel efficiency in aviation). Our belief is that it is more important to focus on what a company’s contribution to the long-term global carbon reduction is, rather than to fixate on its historic carbon footprint – provided, of course, that these companies are ‘best-in-class’ and that there is a clear path to reduce emissions over time. 

Some of our investments which fall into this category include BlackRock World Mining Investment Trust, Freeport McMoRan, ArcelorMittal, Safran and Smurfit Kappa. These companies are significant contributors to the portfolio’s current carbon footprint and we therefore look for evidence of long-term positive impact and that ongoing engagement is leading to improvements in operational efficiency and social awareness.

As discussions progress during COP26 and beyond, we and the managers that manage money on our behalf, will continue to develop our approach to climate change and will assess the investments held, pushing for change where necessary and reporting in the clearest way possible. Witan has continuously evolved over the last 112 years to meet the challenges and opportunities presented by an ever-changing environment. COP26 marks another step on this long journey and we remain committed to making the right decisions for our shareholders and for the planet and its people.”

James Hart
Investment Director, Witan Investment Trust plc
3rd November 2021

 

This communication is issued and approved by Witan Investment Services Ltd. Witan Investment Trust is an equity investment. Please remember that past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise as a result of currency and market fluctuations and you may not get back the amount originally invested. Any reference to individual securities does not constitute a recommendation to purchase, sell or hold the investment and there is no guarantee that they will remain in the portfolio. 

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