In 2013, RS Group added an explicit focus on climate change mitigation and adaptation to its total portfolio. This decision was informed by the growing Divest-Invest movement and by information provided by Carbon Tracker Initiative (an organization supported by RS Group), pointing to a “carbon bubble” with substantial financial risks affecting fossil fuel investments. By extension, an increased understanding of the impacts of climate change and of the importance of our natural environment in supporting all life on earth, also inspired us to explore ways to contribute to environmental causes, particularly in the Asian region.
As a result of this, on the investments side, we decided to:
- Divest from all exposures to coal, oil and gas exploration and production companies.
- Selectively allow investments in natural gas companies if those companies have a strategy that supports the transition to a lower carbon economy.
- Increase the allocation to targeted impact (TI) investments in areas such as energy efficiency and renewable energy supporting the transition to a low carbon energy system.
- Demand that asset managers working on behalf of RS Group better incorporate climate risks in their investment processes and in their engagement with companies.
- Actively consider climate change issues when voting proxies, participating in resolutions and engaging with companies.
And on the grant side, RS Group:
- Continued to provide grant funds to support research on investment activities that could potentially have an impact on climate change.
- Provided grants to non-profit organizations (e.g., ADM Capital Foundation in HK) on environmental issues, including air quality (e.g., Clean Air Network), water pollution (e.g., China Water Risk), and marine conservation and management.
- Supported investor advocacy initiatives (e.g., the Divest / Invest campaign to which RS Group became an official signatory in Q4 2015).
- Funded the development of As You Sow’s “Fossil Free Funds” platform (which applies a fossil-free lens to fund analysis).
All of these activities resulted in value creation that benefitted the entire portfolio. Not only did RS Group reduce the financial risks posed by carbon bubble, we achieved a lower carbon footprint compared to the benchmark. Our fossil fuel divestment policy was an important contributor to financial returns during the recent downturn in commodity markets. Our commitment to actively reduce our portfolio’s contribution to climate change spurred us to take more proactive steps by allocating a part of our grant budget to environmental causes and support organizations and initiatives focused on Hong Kong and Asia.