22.03.2023 ・ Accelerating climate protection through sustainable investment

How to minimise the climate impact of equity and bond portfolios Salm-Salm & Partner GmbH

Reference

Salm-Salm & Partner use tools from right° to gauge the impact of their investments on global warming and are continuously re-evaluating their portfolio with a view to Paris-alignment.

Family-run asset management Salm-Salm & Partner has its own unique approach: Ever since the company was founded in 1989, it has been a committed advocate of sustainability, living up to environmental convictions shaped by personal experience. Because for 32 generations now, the Salm-Salm family has worked the land – cultivating fields, forests, and vineyards – and in the last three decades, they have witnessed dramatic changes: Grapes are now ready for harvest one month earlier, while forest stands have been blighted by pests and heat waves. Determined to counteract the man-made climate change that has so clearly impacted the River Nahe (a tributary of the Rhine), and his team resolved to make companies’ climate impact a key criterion when choosing where to invest. And feeling that carbon footprint alone was an inadequate investment yardstick, Salm-Salm & Partner set out in search of a more forward-looking approach to climate profiling.

“Carbon emissions are invariably an indicator of a company's past performance, not a path forward. The XDC Model from right°, by contrast, provides us with a forecast of a company’s future climate impacts. So, for example, if a concrete manufacturer is already on the 1.5°C pathway, it might still be considered a viable investment.”

Constantin prinz zu Salm-Salm_square — **Constantin Prinz zu Salm-Salm, Managing Partner, Salm-Salm & Partner GmbH**

Proactively transitioning to a 1.5°C-aligned portfolio

When comes to aligning an equity and bond portfolio with the Paris climate target, the first step is to ensure transparency regarding the climate impact of each individual asset. The XDC Portfolio Explorer from right° was used to analyse Salm-Salm & Partner’s entire investable universe, enabling portfolio managers to see at a glance which companies were already on the 1.5°C pathway and which were not. The X-Degree Compatibility (XDC) M examines a company’s economic activities and calculates their impact on global warming in °C. With the aid of this simple climate metric from right°, stocks from various sectors can be searched and ranked according to their Paris compatibility. The Salm-Salm & Partner team use the web-based XDC Portfolio Explorer to pre-filter their stock picks in line with their climate convictions. And when managing their Article 9 global equity funds in line with the EU’s Sustainable Finance Disclosure Regulation (SFDR), they use the XDC Portfolio Explorer to regularly review and report on the climate impact of investments.

Tools used:

X-Degree Compatibility (XDC) Model
XDC Portfolio Explorer

Calculations performed:

Baseline XDC
Portfolio XDC

“As asset managers, we have devised our own strict code of practice for sustainable investment. The tangible °C metric from right° complements our in-house ESG criteria, enabling us to unequivocally quantify the climate impact of our investments.”

On track to 1.5°C

Salm-Salm & Partner see their 1.5°C pathway as a gradual journey. As of yet, very few companies have achieved Paris-alignment. In the long term, in many cases it would be a mistake to exclude companies from consideration purely on the basis of their current carbon footprint. That is why the XDC Model’s robust climate impact calculation already includes a clear decoupling of emissions from value creation and future developments. The XDC Scenario Explorer from right° is another invaluable tool for assessing individual companies by checking the effectiveness of their strategies and specific climate goals for achieving Paris-alignment. Salm-Salm & Partner see huge potential for the future in this climate scenario analysis approach.

“The personal commitment and values of the founders of right° are a perfect fit with our corporate philosophy. What’s more, right° has an impressive track record when it comes to climate metrics. We were particularly impressed by the robustness of the XDC Model.”

Jonas Landgraf_square_s — **Jonas Landgraf, Portfolio Manager, Salm-Salm & Partner GmbH**

With right° as their capable partner, Constantin Prinz zu Salm-Salm and his team can focus on achieving appropriate returns for investors while at the same time optimising the climate impact of their own investments. Because Salm-Salm & Partner aim to ensure that by 2030, all their funds are compatible with the 1.5°C goal of the Paris Climate Agreement.

XDC Portfolio Explorer

Your portfolio alignment at at glance. Access forward-looking climate metrics and target benchmarking for single securities and your entire portfolio.

Learn more

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