T Rowe Price Retirement 2015 Adv

Date:

Taking An Inclusive View

T. Rowe Price myPLANnetwork

The ESG investing trend, particularly with climate, is toward greater breadth, said S& P DJIs Steadman. As an example, he pointed out that the S& P 500 Carbon Efficient index contains nearly the full portfolio of the S& P 500 index. Theres a reweighting methodology that tilts the constituents toward companies that are doing better from a carbon efficiency standpoint. But rather than focusing on exclusions, as ESG investing has done in the past, the trend now is toward being as inclusive as possible. That is, capturing a broader universe of opportunity and then modifying capitalization weights to reflect ESG principles and priorities.

According to Steadman, broad, climate-centric indexes tend to reflect the general market more so than narrow, exclusionary indexes. Performance deviations from the market beta are fewer, and the composition offers diversification more in line with the market.

Through that shift, index users can seek beta exposure as well as express what one could call values alignment, he said. These indices also aim to incentivize companies to act in a way that we hope would mitigate climate change.

According to Howard, investors can no longer view climate exposure as a choice whether or not to invest in climate change, or whether or not to be exposed to climate change. Every asset class, of every type, is now to some degree impacted by climate change.

Read:Rising Climate Change risk not yet factored in markets

Sustainability At The Forefront

The global energy system is undergoing a seismic transition from one based primarily on fossil fuels to one based primarily on renewable sources, said Carlo Funk, head of ESG investment strategy for Europe, the Middle East and Africa at State Street – Global Advisors. And this is going to happen, full stop.

Funk said he believes the world is at a tipping point where ignoring climate change is no longer an acceptable option, and climate-related developments, such as increased regulation and more commitments from the private sector, are accelerating. He pointed out that a couple of decades ago, a chorus of industry experts doubted Germanys then-announced renewable energy goals, claiming that the ambitious program couldnt be supported by the countrys infrastructure. However, last year, Germany surpassed 50% renewable generation.

Right now were seeing a lot of pledges, but little has happened as yet, Funk said. Eventually those companies will have to live up to those promises and what happens then? Then we will likely see massive capital repricing and reallocation, leading to climate-centric investment risks and opportunities. Financial market participants will be held accountable, and those are fundamentally governments, corporations, pension plans and the banking and financial sectors. So, while the transition to a low-carbon economy wont happen overnight, if you dont act now to prepare, it could be too late.

Read:Are we on the road to net-zero?

T Rowe Price Fund Family

Some funds charge fees to cover marketing, distribution and administrative expenses. These include marketing fees known as 12b-1 fees, as well as certain record keeping or shareholder services fees. Such fees are included in the fundsâ overall expense ratio and a portion of these fees may be paid to us. We reserve the right to change the funds we make available at any time without prior notice.

Company

©2022 by Folio Financial, Inc., a Goldman Sachs Company. All rights reserved. Brokerage, custody and clearing services are offered by Folio Investments, Inc., a registered broker-dealer and member FINRA/SIPC. Folio Investments, Inc. is a subsidiary of Folio Financial, Inc. Folios can be managed by an investment advisor or unmanaged and are not registered investment companies. Folio Financial, Inc., and Folio Investments, Inc. are affiliates of Goldman Sachs & Co. LLC and subsidiaries of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization. The Goldman Sachs Group, Inc. and its subsidiaries and employees are engaged in businesses and have interests other than the services provided by Folio Financial, Inc. and its subsidiaries.

You May Like: Retirement Communities On The Beach In Florida

All Stakeholders Push Forward

Within the broader investment topic of environmental, social and governance, climate is right at the top in terms of impact and importance, according to Sarah Bratton Hughes, head of sustainability for -Schr-oders- in North America. For many years, it has been integral to how we think about the investment landscape. But now, increasing pressure is translating into corporate action. As a consequence, its an unavoidable issue for asset managers and asset owners. Thats not to say other areas of ESG arent also important. But climate is both imminent and pressing demanding an immediate response.

The push toward disruptive change and a net-zero economy is happening at the political level, the corporate level and the social level, she said, adding that it has gathered significant momentum over the past couple of years. About two-thirds of the worlds emissions come from countries that have made commitments to net-zero carbon emissions over the next few decades and the past 12 months have seen about a 50% increase in the number of companies making commitments to the Paris aligned-decarbonization targets.

The other important point here is that climate considerations are not just about carbon, nor even just about greenhouse gases, Drew continued. Theyre also about biodiversity and considering how companies use land and water resources, because they impact biodiversity levels and deforestation has a very big impact on climate.

Both Risk And Opportunity Are Broadening

Dividend Aristocrats Part 44: T. Rowe Price Group

Climate impact isnt just about carbon, said Hari Balkrishna, portfolio manager for the Global Impact Equity Strategy at T. Rowe Price. Investors need to be focused on things like methane, and -gas type refrigerants, which in some ways are much more harmful than traditional . And the risks and opportunities stretch well beyond the energy and transportation sectors to encompass changes in sustainable agriculture, bioplastics and replacing petroleum products with green hydrogen for industrial applications and heavy transportation.

Climate factors have to include things like energy transition or the amount of physical climate risk a company has, their biodiversity impact, whether or not theyre contributing to circular economies, and how theyre using land and water resources, said T. Rowe Prices Drew. We also look at how companies handled past controversies, which can be a good indicator of how well theyre managing environmental issues. We consider climate and ESG issues very broadly across every single portfolio because these issues, to some degree, are going to affect the financial outcomes of all of our investments.

Also Check: Pinecrest Retirement Community Largo Fl

Zacks Research Is Reported On:

  • MSN

This page has not been authorized, sponsored, or otherwise approved or endorsed by the companies represented herein. Each of the company logos represented herein are trademarks of Microsoft Corporation Dow Jones & Company Nasdaq, Inc. Forbes Media, LLC Investor’s Business Daily, Inc. and Morningstar, Inc.

Copyright 2022 Zacks Investment Research | 10 S Riverside Plaza Suite #1600 | Chicago, IL 60606

Visit Performance Disclosure for information about the performance numbers displayed above.

Visit www.zacksdata.com to get our data and content for your mobile app or website.

Real time prices by BATS. Delayed quotes by Sungard.

NYSE and AMEX data is at least 20 minutes delayed. NASDAQ data is at least 15 minutes delayed.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

How We Use Your Personal Data

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.

To learn more about how we handle and protect your data, visit our privacy center.

Also Check: Can I Retire At 55

Transparency Is Our Policy Learn How It Impacts Everything We Do

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

Wed like to share more about how we work and what drives our day-to-day business.

The Power Of Engagement

T Rowe Price Mutual Funds – What I Look For In A Dividend Stock Purchase

To have an impact on climate, or to attempt to mitigate climate risk in an investment portfolio, the first thing that asset owners and investment managers need to do is engage in the issue on multiple levels.

Steadman said he believes that momentum toward climate engagement is likely to accelerate in the U.S., particularly in the second half of this year, and that climate indexes, particularly the S& P 500 Paris-Aligned Climate index, will be major benchmarks and a standard in their own right.

As we build our different products, we very much have in mind that there will be certain asset owners that are expressing their worldview through the prism of an index, said Steadman. Theyre perhaps using an index as a tool for investing in line with their institutions values. Climate-focused indices offer a comprehensive vehicle that institutional investors can use with passive management, thereby potentially rewarding companies for positive progress on ESG generally, and climate specifically.

For us, the question is, how can we use our influence as active managers to facilitate change in companies, and help those companies transition toward more sustainable businesses and business models? said Howard. Thats really the role of engagement and ownership, and using our voice and our leverage to achieve that.

Also Check: Average Retirement Income By State

Demand For Green Bonds

Lawton sees two areas of opportunity. The first is green bonds, which grew to $136 billion in issuance in the first quarter of 2021, a 100% increase over the first quarter last year, and he expects that growth to continue at a healthy rate.

There are also pockets of value among hybrid capital securities from issuers at the forefront of the renewable-energy movement, Lawton said. These securities typically offer attractive valuation relative to senior unsecured bonds from the same company. Capturing incremental yield while directing capital to long-term climate winners is an appealing proposition.

However, he offers a cautionary note on green bonds: The market is wrestling with high sector concentration, price distortions and greenwashing the risk that investments presented as green really arent, once you look under the hood. About 80% of corporate green bonds originate from just three sectors: utilities, banks and real estate. Over time, Lawton said, diversification should improve as new issuers enter the market. In addition, investors may have to navigate price distortions given increasing demand from climate-focused bond funds. Lastly, he noted, its important to go beyond the green label to research the underlying projects being financed. Not all green bonds are created equal. Investors need to understand relative climate benefit varies by bond, said Lawton.

Layer In Fiduciary Duty

Going beyond influence, asset owners and investment managers also need to think about engagement through the research and portfolio-construction process.

No company is going to escape climate impacts, said Howard. So from an investment perspective, we need to engage in the issue from the point of view of risk, opportunity and fiduciary duty. Our aim is to identify those companies with strong business models that will not only survive, but thrive, because management has taken steps to ensure the organizations sustainability.

Read:Transition to a 1.5°C World

The thing with climate is that a completely holistic ESG approach is not going to have much of a climate impact, said Funk. For example, a broad-based ESG portfolio will never be Paris-aligned. To reach that goal, the investment methodology needs to be refined with additional data points, metrics, overlays and other approaches. ESG and climate principles are not mutually exclusive, but if you want to really move the dial when it comes to climate and climate change, you need to engage specifically with the climate issue, and climate should be embedded as the dominant analytical factor.

You May Like: Can A Retired Person Cosign A Mortgage Loan

How We Approach Editorial Content

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investors point of view. We also respect individual opinionsthey represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.

Structural Disruption: Who Will Win

MassMutual RetireSmart

Big Energy incumbents have an advantage because they understand the entire infrastructure and how to bring a unit of energy to the end consumer, Funk said. But within that universe, there will be winners and losers. The winners will be those that adapt more quickly and drive the bulk of innovation.

He likened the coming energy shakeout to the trajectory of digital technologies. Innovation will come from large incumbents, but new emerging players will also tap into the value chain to help bring the world to net-zero emissions. That value chain stretches beyond energy to include steel, cement, fertilizer, plastics, pure thermal energy, thermal storage, agribusiness, construction materials and textiles. Funk argued that winners are likely to be those that have a favorable carbon footprint or those than can rapidly reduce their exposure to climate-related costs.

Read:Fundamental Active Equities: Climate debate

These will be the biggest structural changes since the industrial revolution, and there will be no shortage of very, very interesting companies and opportunities out there for investors to consider, Funk said.

Also Check: How Much Do You Need A Year To Retire

Data Gets More Granular

Underlying that work is a commitment to comprehensive, transparent data that has a wide range of uses. For example, Steadman pointed out that low-volatility strategies can be concentrated in carbon-intensive industries and good data helps asset owners put a climate lens on a strategy that is not precisely ESG or climate. Data is essential in addressing the question of greenwashing, he noted, and it is also critical in measuring risk in specific industries and in comparing companies within their peer groups.

In 2016, S& P Global acquired a company called Trucost, a recognized leader in the field of environmental metrics, Steadman said. We combined Trucosts capabilities with ESG scoring and analytical tools from a Swiss company S& P Global acquired called SAM, which is now also part of S& P Global, to create Sustainable1, an S& P Global ESG research, data and analytics hub. When it comes to environmental data that Sustainable1 produces, theres a checking that takes place, where we start with public disclosures and then model our own estimates for climate impact. That validation step is critical because there can be widely different levels of reporting rigor when it comes to emissions and other environmental metrics. So its important to publish indices based on consistent, sound data.

How We Make Money

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

You May Like: Best Way To Withdraw From 401k After Retirement

Share post:

Popular

More like this
Related

Sign Up For Ssi Retirement

Do Social...

Highland Springs Retirement Community North Dallas

Experience Exceptional...

How Does 401k Retirement Plan Work

How Does...

Kiplingers Best Places To Retire

How Important...