Global Finance Coalition Set to Invest $130 Trillion in Climate Change

A global finance coalition of investors, banks, and insurers controlling $130 trillion in assets said it would use that capital to hit net zero emissions targets in its investments by 2050.

“The group, called the United Nations Glasgow Financial Alliance for Net Zero, is made up of 450 banks, insurers and asset managers in 45 countries,” the New York Times reports. “It said the pledge amounted to a transformation of the global financial system and would help businesses, financial firms and entire industries undergo fundamental restructuring for a carbon-neutral future.”

“We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account,” said Mark Carney, the former head of the Bank of England.

Two Funds That Address Climate Change

With this global shift towards a focus on climate change, investors can get exposure (sans the United States) using the FlexShares ESG & Climate Developed Markets ex-US Core Index Fund (FEDM). The fund seeks investment results that correspond generally to the price and yield performance of the Northern Trust ESG & Climate Developed Markets exU.S. Core Index.

Best of all, the fund comes with a low net expense ratio of 0.12%, which is remarkably lower than its category average. In summary, FEDM:

  • Is designed as a costeffective core building block of a portfolio, incorporating risk controls to reduce tracking error and deliver market-like exposure relative to the starting universe.
  • Applies a multidimensional ESG framework, incorporating exclusions across ESG controversies and business involvement while seeking to deliver ESG uplift.
  • Uses the Northern Trust ESG Vector Score, which is focused on financial materiality and aligned with industry standards Sustainability Accounting Standards Board (SASB) and Tax Force on Climate Related Disclosures (TCFD), integrating not only historic metrics and indicators, but also those that assess how exposed a company may be to future risks and opportunities.
  • Places intentional emphasis on reducing climate transition risk by reducing ISS carbon emissions intensity and improving ISS Carbon Risk Rating.

For concentrated exposure in the U.S., investors can look at the FlexShares ESG & Climate U.S. Large Cap Core Index Fund (FEUS). The fund follows the Northern Trust ESG & Climate US Large Cap Core Index, which is designed to construct a universe of large-cap companies that possess ESG characteristics.

Big tech has been one of the sectors that have been spearheading not only climate control, but ESG in general. As such, investors will see big tech household names like Apple, Microsoft, and Amazon when they look at the fund’s top holdings.

For more news, information, and strategy, visit the Multi-Asset Channel.