Tax-efficient UCITS global equity fund launching to track STOXX Willis Towers Watson World Climate Transition Index with anticipated $1bn from Defined Benefit (DB) and Defined Contribution (DC) pension plan investors
Major Market Innovation for CoP26 Private Finance Agenda
GLOBAL, October 11, 2021 – Qontigo and Willis Towers Watson have launched an innovative family of climate transition indices driven by a next generation methodology that directly quantifies the impact of a Paris-aligned climate transition on equity valuations. The STOXX Willis Towers Watson Climate Transition Indices (CTI) help investors, governments and companies to manage risk, capture opportunities in their portfolios, align with the goals of the Paris agreement and work towards Net Zero targets.
The CTI enables a more sophisticated way of managing climate risk, that looks beyond carbon emissions, by making a forward-looking, bottom-up evaluation of transition risk and opportunity for each company. A proprietary Climate Transition Value at Risk (CTVaR) measure analyses the impact on projected company cashflows of moving from a ‘business as usual’ scenario – reflecting current policies – to a world where emissions pathways are fully aligned to the goals of the Paris agreement.
By incorporating climate risk explicitly, this innovative approach allows investors to allocate in a robust, transparent, and low-cost manner towards firms that will build – and benefit from – a future global economy that values and manages climate risks.
In addition to the launch of the index, AMX (the “Asset Management Exchange”) an affiliate of Willis Towers Watson is launching a UCITS fund, which will track the STOXX Willis Towers Watson World Climate Transition Index. Willis Towers Watson has partnered with EOS at Federated Hermes, a market leading stewardship provider, to deliver voting and engagement services for the fund. Climate change is a key focus area for EOS’ engagement.
The fund, which will be available to DB and DC pension plans in multiple countries, is anticipated to receive in the region of $1bn by the end of 2021.
Craig Baker, Willis Towers Watson’s Global Chief Investment Officer, said: “Investors need a robust framework that can quantify and incorporate the financial impact of climate risk, but this is something that just hasn’t been widely available until now. We believe that understanding this transition, through our Climate Transition Value at Risk methodology (CTVaR), should be one of the biggest sources of alpha across all asset classes over the next few years. This new fund will be a valuable tool for pension plans to both reduce their climate risk and take advantage of the opportunities thrown up by a transition to a Paris-aligned world. Climate change is a systemic and urgent global challenge and also one that will significantly disrupt capital allocations and returns.”
We believe that understanding this transition, through our Climate Transition Value at Risk methodology (CTVaR), should be one of the biggest sources of alpha across all asset classes over the next few years.”Craig Baker | Global CIO
David Nelson, Climate Transition Analytics Senior Director, Willis Towers Watson, said: “By curating data from multiple sources, the CTI takes a unique approach by refreshing forward-looking company transition risk over time rather than simply using historic carbon emissions data. Whilst current climate metrics can help to identify outliers, many of the current approaches to factoring climate risk into investments tend to be simplistic and fall short of accurately identifying their impact on company valuations.”
Neal Pawar, Chief Operating Officer at Qontigo said: “Understanding and addressing climate transition risk is essential to investment decisions today. Together with Willis Towers Watson, we leveraged our open architecture to translate the Willis Towers Watson CTVaR model into a transparent, systematic index solution.”
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.
Qontigo is a leading global provider of innovative index, analytics and risk solutions that optimize investment impact. As the shift toward sustainable investing accelerates, Qontigo enables its clients—financial-products issuers, capital owners and asset managers—to deliver sophisticated and targeted solutions at scale to meet the increasingly demanding and unique sustainability goals of investors and asset owners worldwide.
Qontigo’s solutions are enhanced by both our collaborative, customer-centric culture, which allows us to create tailored solutions for our clients, and our open architecture and modern technology that efficiently integrate with our clients’ processes.
Part of the Deutsche Börse Group, Qontigo was created in 2019 through the combination of Axioma, DAX and STOXX. Headquartered in Eschborn, Germany, Qontigo’s global presence includes offices in New York, London, Zug and Hong Kong.
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