Companies providing solutions to mitigate and adapt to climate change and making their business resilient to its consequences should have a long-term competitive advantage.
Strategy Overview
The strategy aims to achieve its climate change mitigation and adaptation objective by investing in companies that reduce emissions, improve resource efficiency, and limit the physical consequences of climate change to align the portfolio carbon footprint with the landmark Paris Agreement adopted in December 2015. Companies that may benefit financially and competitively from the transition to a global low-carbon economy can be grouped into the following three broad categories:
- Solutions. Companies with majority of revenues from products and services that reduce emissions, improve resource efficiency, and/or protect against the physical consequences of climate change.
- Transitioning. Companies with moderate to high emissions or resource intensity that are transitioning to solutions or resilient.
- Resilient. Companies with relatively low carbon and resource intensity and solutions offerings representing <50% of revenues.
A proprietary climate screening process is used to identify and select high quality, growth companies that fit within its climate change criteria.
The strategy offers a compelling investment opportunity in a segment of the market with secular demand growth. A proprietary ESG screening process helps calibrate risks and opportunities to build a concentrated portfolio of 40-50 names with a 5-year holding period diversified across all countries, regions and industries.
Focus on companies whose long-term prospects are not accurately captured in current valuations provides upside opportunities while attempting to limit downside risk resulting from excessive optimism. ESG integration is embedded in the process.
Engage with management and cast votes to influence emission reductions, efficient resource use and strong climate change oversight and transparency.
Search for carbon reduction opportunities beyond environmental sectors for broad impact and optimal risk/reward outcome.
Our Philosophy
Our investment philosophy combines Franklin Templeton’s fundamental value investing with robust, in-house climate change research to capitalize on investment opportunities, reduce risk and influence positive outcomes related to climate change. We use a disciplined, repeatable process to conduct in-depth analysis and select equity securities which we believe are undervalued, based on such factors as their expected long-term earnings and the value of the business assets.
Investment Process
Deep fundamental research and business analysis is the heart of our investment process. The team evaluates companies from multiple angles and assesses material ESG factors, to identify companies that meet their strict growth, quality and valuation criteria.
Management Team
The Templeton Sustainability team manages the Templeton Global Climate Change strategy and is responsible for climate change portfolio management, establishing the climate change investable universe and searching for potential value opportunities. As part of the broader 30+ member Templeton Global Equity Group, the team works closely with industry analysts across regional, large cap and small cap teams to find the best opportunities. New ideas are assigned according to industry, market cap and regional coverage, with the Global Climate Change Team often working jointly on research to share their thematic expertise. Importantly, this structure provides the strategy with deep coverage critical to identifying emerging solutions and companies transitioning their business to be more resilient.
Craig Cameron, CFA
Senior Vice President, Portfolio Manager, Research Analyst
Tina M. Sadler, CFA
Executive Vice President, Portfolio Manager, Research Analyst
Lauran Halpin
Edinburgh, UK
Managed Fund since 2021
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Important Legal Information
All investments involve risks, including possible loss of principal. All investments involve risks, including possible loss of principal. Equity securities are subject to price fluctuation and possible loss of principal. Diversification does not guarantee a profit or protect against loss. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in developing markets involve heightened risks related to the same factors. Currency rates may fluctuate significantly over short periods of time, and can reduce returns. Investing in companies in a specific region, including Europe, is subject to greater risks of adverse developments in that region and/or the surrounding regions than an investment vehicle that is more broadly diversified geographically. Investments in developing markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets' smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio which may result in significant volatility and cause losses (as well as enable gains) on an amount that exceeds the initial investment. The managers’ environmental social and governance (ESG) strategies may limit the types and number of investments available and, as a result, may forego favorable market opportunities or underperform strategies that are not subject to such criteria. ESG factors or criteria are subjective and qualitative, and the analysis by the manager may not always accurately assess ESG practices of a security or issuer, or reflect the opinions of other investors or advisors. There is no guarantee that the strategy's ESG directives will be successful or will result in better performance and may not work as intended. These risk considerations are discussed in the prospectus.
There is no assurance that the employment of this strategy will result in the investment objective being achieved.
This information is intended for institutional audiences interested in institutional products and services available through Franklin Templeton and its affiliates. Various account minimums or other eligibility qualifications apply depending on the investment strategy or vehicle.
The information contained on this webpage is intended only as a general overview of Franklin Templeton investment capabilities and is for informational purposes only and should not be construed or relied upon as investment advice.
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.