Russell Investments has launched a Low Carbon Global Shares Fund in response to client demand for a fund that supports management of climate-change risk and the transition to a low carbon economy.

The fund has raised $378 million in seed money, and has tilts towards companies with positive environmental, social, and governance (ESG) characteristics more broadly, ensuring the final
portfolio passes a ‘common sense’ test of what investors expect from a sustainable low carbon solution.

It is designed with Russell’s proprietary ‘decarbonisation’ investment strategy, and reflects the approach taken in existing bespoke institutional mandates. It targets a reduction in carbon footprint and carbon reserves of 50%, relative to the MSCI ACWI benchmark (ex-Australia). It aims to maintain performance in line with that benchmark, with a low tracking error of less than 1%. It does this by avoiding the asset, sector and industry biases that can occur with a pure divestment approach.

“This rules-based solution is designed to help clients meaningfully reduce exposure to carbon-intensive holdings and invest more in carbon-friendly and renewable energy opportunities, all without materially affecting performance,” Russell Investments portfolio manager James Harwood says.

The fund excludes sectors including cluster munitions, nuclear weapons componentry and anti-personnel mines.