"Participation in collective initiatives with other investors, such as the Climate Action 100+, is another powerful way to engage with corporates where speaking for a wide group of investors carries more weight. For the HSBC Global Equity Climate Change Fund we deliberately seek companies whose revenues are aligned with the energy transition and decarbonisation themes and who are intentionally trying to make a positive change."
He adds: "Engagement with these companies is patient and private and about understanding and encouraging appropriate commitments, setting standards to drive outcomes and establishing expectations. Inevitably issues will emerge that might contradict the sustainable development goals and this will require more detailed engagement to ensure that any effective resolution is achieved in a timely manner.”
Paul Niven, head of multi-asset portfolio management at BMO Global Asset Management, says: "First off, diversification is key and by spreading our exposures across a range of asset classes, geographies and individual companies we limit the impact of disappointments in any one area. It also means we’re casting our net wider over a host of potential sources of return.
"Diversification is a fundamental investment principle for very good reason. Asset allocation plays a key role and for more cautiously minded investors we place greater emphasis on fixed income over equities, for example.
"Alongside this more strategic perspective, we believe that it’s important to think tactically, and adjustments taken on a more near-term view will be important in helping protect capital and take advantage of volatility. Our stock-pickers must also think about capital protection and the quality of businesses and valuation play a key role in that.
"Right now for example, many commentators are concerned about valuations in equities. We think with fiscal and monetary policy, markets look reasonably supported, but there are certainly some areas of excess, in US tech for example. Avoiding such pockets and emphasising sectors and companies where valuations are less stretched is a sensible way of adding an element of downside protection."
David Thorpe is special projects editor at FTAdviser
