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Pathfinder eyes carbon risk

Pathfinder Asset Management has cut ten companies from its portfolio, reducing its exposure to carbon and fossil fuels.

Friday, March 9th 2018, 6:00AM

by Susan Edmunds

Chief executive John Berry said it had been left with three companies with carbon exposure in the wholesale and retail versions of its Global Responsibility Fund: Santos, Statoil and Repsol.

It follows the New Zealand Super Fund decision to divest investments with carbon exposure – citing a risk to the future because of carbon emissions being underpriced.

Outgoing NZSF chief executive told Parliament there would be “winners and losers” and not doing anything meant taking on undue risk.

Berry said that “asymmetric risk” Orr had mentioned was part of Pathfinder’s decision-making, too.

Companies with heavy exposure to carbon would come under increasing pressure. Products would be phased out over time as the future became less carbon-driven.  “Less carbon and fossil fuel in the business derisks the portfolio.”

Pathfinder co-founder and chief investment officer Paul Brownsey said there was a risk of assets being stranded.

Brownsey and Berry said the businesses they were left with had overall ESG ratings that were above average.

“You can be a reasonably good company in a bad industry, and these are,” Berry said. “We’ve still massively reduced our exposure.”

Brownsey said those companies that remained were also making significant investments in seeking alternatives.

Pathfinder’s in-house ESG specialist Rebecca Lindegger headed the project to determine which stocks should be dropped. She took a focus on oil sands and arctic drilling.

“The ones we ended up keeping, although they were not ideal, they appear to be working on it and divesting from really significant areas.”

Berry and Brownsey said it was something that came up in conversation with retail investors when their share holdings were disclosed.

“Perhaps it was because it was a high-profile name, you get people saying ‘explain the rationale for investing in this’.”

The holdings reduction in energy was reallocated to healthcare and IT.

Tags: John Berry Pathfinder Asset Management responsible investing

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