Introduction
At Aviva Investors, we believe that climate change is not only a defining challenge of our time but also a powerful driver of long-term investment value. The Aviva Investors Global Climate Equity (GCE) Strategy reflects this belief, an actively managed strategy that seeks to deliver both financial performance and meaningful climate outcomes.
The Strategy invests in global equities, aiming to outperform the MSCI All Country World Index (ACWI). Our approach is rooted in the conviction that companies supporting the transition to a low-carbon economy are better positioned to thrive in a rapidly evolving global economy. We focus on two key categories of issuers; solution providers and operational leaders.
Companies delivering products and services that enable climate mitigation and/or adaptation.
Businesses actively reshaping their business models and operations to be resilient in a warming world and low-carbon economy.
2024 saw another year of narrowly-driven strong global equity returns of 17.5% with sustainable equity strategies again facing challenging market conditions – the Morningstar EAA Equity Ecology sector (the wider peer group that the Aviva Investors Global Climate Equity Strategy sits in and encompasses many other climate equity strategies within it) posted just 0.9%. While our Global Climate Equity Strategy underperformed its MSCI ACWI benchmark – largely due to the positions we chose not to hold – we were still able to keep pace reasonably well with a net return of 13.5%.
This resilience was underpinned by two key strengths of our investment approach:
Pairing climate advantage with financial advantage to help deliver profitable growth from the climate theme.
Our additional focus on operational leaders to increase our investment opportunity set to create a more diversified portfolio that can deliver more resilient performance through market cycles.
Using this approach helped lead us to several U.S. based ‘Solutions’ companies (whose products or services help mitigate or adapt to climate change) which were amongst the top attributing stocks in 2024:
Trane Technologies – even if we succeed in limiting global warming to 1.5 °C, as outlined in the Paris Agreement, the world will still be warmer than it is today. As temperatures rise - especially in urban areas - the demand for cooling solutions will inevitably grow. This presents an opportunity for companies like Trane Technologies, a leader in Heating, Ventilation, and Air Conditioning (HVAC), which was the top contributing stock in the Strategy in 2024. Trane continued to see positive earnings momentum driven by strength in the commercial HVAC segment aided by continued investment into improving energy efficiency in key verticals such as hospitals, education, data centres and high-tech industrial.
Hubbell – a leading manufacturer of utility and electrical solutions, was among the top-performing stocks. As part of our Strategy’s grid hardening theme, Hubbell supports utilities in strengthening and modernising the power grid – an essential step toward enabling broader adoption of renewable energy.
2024 also entailed COP29, held in Baku, Azerbaijan, which concluded with several significant outcomes1:
New Climate Finance Goal: A new target was set to mobilise at least $300 billion annually by 2035 to support developing countries in their efforts to cut emissions and address climate impacts. This is a substantial increase from the previous goal of $100 billion per year.
Carbon Markets: Progress was made on establishing a global architecture for carbon markets under Article 6 of the Paris Agreement. This aims to facilitate international cooperation on carbon trading and enhance transparency.
National Climate Commitments: Countries were encouraged to submit more ambitious and investable nationally determined contributions (NDCs) to meet global climate targets.
Adaptation and Loss & Damage: Discussions highlighted the need for greater support for adaptation measures and addressing loss and damage in vulnerable countries.
Fossil Fuels Transition: Despite some progress, there was disappointment over the lack of a clear consensus on transitioning away from fossil fuels.
Overall, while COP29 made strides in climate finance and carbon markets, there remains a need for more ambitious actions, especially in transitioning away from fossil fuels and supporting vulnerable nations.
Portfolio changes
With only one new position added to the Strategy in 2024, trading was a bit more muted compared to previous years – reflective of our conviction in the current Strategy positioning.
We initiated a new position in Public Service Enterprise Group (PSEG), a Solutions holding that operates electricity transmission and distribution infrastructure. This critical infrastructure underpins the transition to a more electrified economy and supports efforts to reduce reliance on fossil fuels.
1 COP29 Outcomes: Unpacking the NCQG and More | World Resources Institute. Summary_Global_Climate_Action_at_COP_29.pdf. 4 key takeaways from COP29, from climate finance to carbon markets | World Economic Forum
Past performance is not a reliable indicator of future returns.
We’ve had two back-to-back years of c.20% global equity market returns and a lot of market commentary around stretched valuations, particularly in US equities. Whilst this observation has merit, a lot of recent performance and valuation stretching has been highly concentrated – meaning we think earnings could come through in 2025 to maintain valuations and potentially broaden out. There are of course many unknowns that could significantly affect the path of global equities next year – high on the list being what the new US administration actually implements in terms of policy.
For the Global Climate Equity Strategy, we believe our dual focus on aligning climate advantage with financial strength – alongside our emphasis on operational excellence – positions us well to navigate global equity markets in 2025 and we will also be keeping a close eye on COP30, to be held in Belém, Brazil.
Looking beyond 2025, we believe there are several themes that could shape equity markets over many years to come – and excitingly we think there are several companies in our Climate Strategy that have exposure to them:
Past performance is not a reliable indicator of future performanceSource: B-One, Aladdin, Morningstar, Aviva Investors as of 31 December 2024. Performance shown for the Aviva Investors Global Climate Equity Composite in USD. The composite start date is 30 June 2020, while the inception date of the strategy is 8 June 2020. Max Burns has managed the strategy since 13 July 2021. *Strategy statistics are for a representative portfolio within the Strategy. **This is the Morningstar EAA Equity Ecology sector which is the wider peer group that the strategy sits in and encompasses many climate strategies within it. Further information can be found here. GIPS disclosures can be found in the Additional Strategy Information Chapter of the report.
Key Facts
Portfolio Manager
Max Burns
Benchmark
MSCI ACWI
Strategy AUM
$1.06b
Strategy Launch Date
8 June 2020
Tracking Error Guideline
2%-6%
SFDR Classification
Article 9
Strategy Statistics*
1 year
3 years
Beta
1.04
0.88
Sharpe Ratio
1.08
0.20
Information Ratio
-0.92
-0.56
Tracking Error %
4.94
5.93
Composite name
Aviva Investors Global Climate Equity Composite
Benchmark name
MSCI All Country World Net Index [TR, NR, USD]
Reporting currency
USD
Report to date
31 December 2024
Period
Composite return gross
Composite return net
Benchmark return
Composite 3Y standard deviation
Benchmark 3Y standard deviation
Number of portfolios (throughout period)
Dispersion
Market value at end of period
Percentage of firm assets
Total firm assets at end of period
2024
14.59%
13.46%
17.49%
16.00%
16.20%
≤5 (≤5)
N/A
1,258.5M
2023
20.57%
19.50%
22.20%
16.19%
16.27%
1,339.8M
0.53%
253,187.8M
2022
-19.53%
-20.30
-18.36%
1,031.5M
0.46%
222,799.4M
2021
13.80%
12.74%
18.54%
957.8M
0.32%
303,653.4M
2020 (from 30/06)
39.39%
38.72%
24.01%
284.9M
0.10%
296,642.4M
Past performance is not a reliable indicator of future performance.Source: Aviva Investors, B-One. GIPS disclosures can be found in the appendix.
