12 December 2015 is a historic date; the climate conference in Paris, after many years of negotiations, saw almost all the countries of the world committing to making the future global economy climate-friendly. The primary goal of the Agreement is to limit global warming to a maximum of 2 degrees Celsius, but preferably 1.5 degrees Celsius above pre-industrial times. Therefore, companies must "decarbonise" themselves quickly and consistently.
For the first time, the Paris Climate Agreement makes reduction targets for greenhouse gas emissions scientifically transparent and quantifiable. It is therefore also an important basis for climate-friendly investment decisions - for example in our two “Paris Aligned” funds.
The value of the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.
In order to be included in one of our “Paris Aligned” funds - either with a global or European focus - companies must align themselves as closely as possible with the goals of the Paris Agreement. This is measured by the “carbon intensity”, i.e. the CO2 emissions of a company per million US dollars of sales. Our fund managers compare this figure with the Weighted Average Carbon Intensity of the global or European benchmark index* and can thus determine the relative effect of a company on the climate.
The “Paris Aligned” funds invest only in companies with a low or reducing carbon intensity. We also look for companies providing solutions to the climate challenge. Both funds comply with the requirements under Article 9 of the EU Sustainable Finance Disclosure Regulation (SFDR).
As responsible fund managers, we pursue not only the objective of making an active contribution to fighting climate change, but also the intention of generating attractive returns. Both the M&G (Lux) Global Sustain Paris Aligned Fund and the M&G (Lux) Pan European Sustain Paris Aligned Fund use a bottom-up approach to invest in quality companies that appear undervalued from a fundamental perspective - these are often strong brands with stable earnings, but can also be companies whose risks are overestimated by the market and thus offer great opportunities. The result is a concentrated portfolio of 30 to 40 global or European equities that are usually held for the long term. This means, at least 80% of both funds are invested directly in the shares of companies, across any sector and of any size. The global fund invests globally, including emerging markets, the European fund invests in companies that are based, or do most of their business, in Europe. Patience and discipline are crucial to the investment style of our funds.
John William Olsen, Fund Manager
If you want to protect the climate, you must also act sustainably in other areas. That is why we make sure that the companies in our “Paris Aligned” funds comply with the UN Global Compact. This means we exclude companies that are in breach of the United Nations principles on human rights, labour standards, environmental protection and anti-corruption.
Furthermore, we do not invest in companies that are active in certain sectors. These include fossil fuels, weapons, adult entertainment, gambling and tobacco. Nuclear power generation is also excluded, as are companies that generate more than 25% of their power from oil or gas production or more than 10% of revenue from coal.
These exclusions reduce the investment universe of the funds by 90% each. Globally, about 300 companies remain on our watch list of potential candidates. At the European level, there are around 100 companies.
We are convinced that sustainable business models are more successful in the long term. ESG considerations are therefore an important part of every phase of our investment process. This is complemented by the science-based selection of companies that have reduced or are reducing their carbon emissions. M&G's goal is to achieve net zero across the investment portfolio by 2050.
Climate change is one of the greatest challenges of our time, and as active fund managers we want to contribute to achieving the goals of the Paris Agreement. That is why we engage with the companies we invest in - for the long term and personally.
We want to find good investments and not just good companies. Discipline is therefore important not only when buying a stock, but also when selling it. Only companies with solid balance sheets, robust cash flows and successful management teams that are both undervalued in the market and meet sustainability criteria make it into our portfolios - if our assessment changes fundamentally, we will engage with the company or sell.
Explanations of the investment terms used on this page can be found in the glossary.
You can find our sustainability-related disclosures here.
* The M&G (Lux) Global Sustain Paris Aligned Fund is actively managed and the benchmark is the MSCI World Net Return Index. The M&G (Lux) Pan European Sustain Paris Aligned Fund is actively managed and the benchmark is the MSCI Europe Net Return Index.
This is a marketing communication. Please refer to the prospectus and to the KIID before making any final investment decisions.
The value and income from the funds’ assets will go down as well as up. This will cause the value of your investment to fall as well as rise. There is no guarantee that the funds will achieve their objective and you may get back less than you originally invested.
The funds hold a small number of investments, and therefore a fall in the value of a single investment may have a greater impact than if it held a larger number of investments.
The funds can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.
ESG information from third-party data providers may be incomplete, inaccurate or unavailable. There is a risk that the investment manager may incorrectly assess a security or issuer, resulting in the incorrect inclusion or exclusion of a security in the portfolio of the fund.
For the M&G (Lux) Global Sustain Paris Aligned Fund, investing in emerging markets involves a greater risk of loss due to greater political, tax, economic, foreign exchange, liquidity and regulatory risks, among other factors. There may be difficulties in buying, selling, safekeeping or valuing investments in such countries.
Further details of the risks that apply to the funds can be found in the fund's Prospectus.
Please note, investing in these funds mean acquiring units or shares in a fund, and not in a given underlying asset such as building or shares of a company, as these are only the underlying assets owned by the fund.
The views expressed on this website should not be taken as a recommendation, advice or forecast.
The funds invest mainly in company shares and are therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.