Our Philosophy
The resilient Way
RESPONSIBLE INVESTMENT
Resilience has adopted the 6 Principles for Responsible Investment and will apply to become a UNPRI Signatory post MBO. Resilience will also sign up for the Finance for Biodiversity Pledge and the Isle of Man business is an active UNESCO Biosphere Isle of Man Partner.
Investment Rules
ALIGNED WITH OUR VALUES
Resilience lives by simple rules:
- No exposure to Fossil Fuels or Financial Institutions funding Fossil Fuels
- No exposure to Companies that are causing significant harm to Biodiversity
- Deep inspection of Companies’ Climate Commitments
- Assessment of Companies’ Biodiversity Commitments
- Transparent reporting of all underlying assets and their sustainability metrics
- Assessing clients’ Sustainability Preferences along with Risk Profile and Investment Objectives
- Investing in SFDR 8 & 9 Funds, direct Equities that meet our Sustainability Criteria and where viable direct Green Bonds
- We will set aside 0.10% of our portfolio management fee for Isle Of Man based conservation projects
Macro-economic Impact Climate & Biodiversity
In our view the macro-economic impact of climate change and biodiversity loss is often underreported and underestimated.
- It’s Inflationary, the negative impact of droughts and flooding on growing regions reduces crop yields and puts pressure on global supply, particularly for emerging markets. Added to that the overuse of pesticides, fungicides, herbicides and fertiliser is depleting biodiversity that our food systems rely upon.
- It Lowers Productivity, a key economic driver that the global economy relies upon, the recent extreme heat experienced in the US, Europe and Asia has a direct impact on the global workforce reducing working hours and having negative health impacts.
- It Increases Costs for Government, Corporates and Households. The costs of Climate Mitigation and Adaptation continue to grow and the increasing pressure on household incomes adds to the cost-of-living crisis. However, consumption habits are changing a at generational level.
- It Worsens Demographics, the health impact of climate change and biodiversity loss is impacting mortality rates and shrinking the global workforce.
Sustainable Prosperity
Sustainable Prosperity refers to the concept of achieving economic growth and development while ensuring the well-being of present and future generations and preserving the natural environment. It encompasses the idea of meeting the needs of the present without compromising the ability of future generations to meet their own needs.
Sustainable prosperity involves balancing social, economic and environmental factors to create a harmonious and resilient society. It requires adopting sustainable practices across sectors, across borders and across generations to create a prosperous future for all.
Our seven sustainable themes are interwoven, complex and deeply rooted in a desire to make a positive impact. We recognise that clients have different sustainable goals and objectives, we aim to help direct their capital to the projects that matter most to them.
At Resilience, we want to usher in a participatory way in which our clients can engage in bringing about sustainable prosperity through their investments so that their great-grandchildren may look back and think their ancestors were wise in their investment decision making.
Dynamic Risk Assessment
Resilience, as an investment business founded on sustainability, utilises an enhanced investment risk framework that focuses on farsighted horizon scanning of climate and biodiversity risks.
The financial risks and impacts of climate change and biodiversity loss can be categorised in two distinct ways:
- Physical risks – which come from the impacts, these can be acute (immediate events such as wildfires, hurricanes, heatwaves or droughts) or they can be chronic, resulting from long-term changes in the climate system (this includes sea level rise and or the increased severity of acute events in terms of frequency and duration).
- Transition risks – this set of risks occur as a consequence of the shift to a low carbon economy and include policy, legislation, technological and changes in consumer behaviour.
Dynamic Risks may not appear likely or highly impactful today or for a given time horizon however that can quickly become financially material if certain triggers are activated through positive feedback loops or planetary boundaries being breached.
Climate and Biodiversity Risks tend to be catagorised as ‘important but not urgent’ and are generally ‘under-priced’ by businesses and markets, we build long-term resilience to these risks in order to protect and grow capital sustainably for our clients.
‘Climate change is an existential threat. We all recognize that, and there’s increasing urgency around it. But the converse is, if you are making investments, coming up with new technologies, changing the way you do business, all in service of reducing and eliminating that threat, you are creating value.’
– Mark Carney, Values
Global Biodiversity Framework
Biodiversity loss is now recognised by the world’s central banks as a source of systematic risk alongside climate change.
The Kunming-Montreal Global Biodiversity Framework (GBF) was adopted at COP15 establishing 4 overarching goals and 23 targets for achievement by 2030.
One of the targets (15) requires that transnational companies and financial institutions monitor, assess and transparently disclose their risks, dependencies, and impacts on biodiversity.
The Taskforce on Nature-related Financial Disclosures (TNFD) is a market-led, science-based and government supported initiative.
TNFD is the sister set of disclosures to the Taskforce for Climate Related Disclosures (TCFD), the finalised TNFDs Recommendations were published in Q4 2023.
The recommendations of the TNFD have been designed to provide companies and financial institutions with a risk management and disclosure framework to identify, assess, respond to and, disclose their nature-related issues.
The GBF is a massive step forward for sustainability, combined with the Paris Agreement we now have climate and biodiversity frameworks working in unison.
Paris Agreement
The Paris Agreement was adopted by 196 parties at COP21 in December 2015. It is a legally binding international treaty to address climate change and its negative impacts.
The goal of the Paris Agreement is to limit global warming to well below 2°C, preferably to 1.5°C compared to pre-industrial level with the aim of becoming climate neutral by 2050.
Under the Paris Agreement countries are required to set increasingly ambitious Nationally Determined Contributions outlining the plans and targets for reducing emissions.
At COP28, 8 years later, we had the first Global Stocktake to assess the collective progress towards achieving the purpose of the Agreement. Are we on track, no, have we made progress, yes, is 1.5°C still attainable, not if we continue on our current trajectory.
Our focus from an investment perspective is to ensure that we are decarbonising portfolios for clients. In our experience most private, trust and institutional clients remain unaware of the carbon intensity of the assets they own.
Our Managing Director shared his views on the wider outcomes of COP28 with Finance Isle of Man.
“Climate change is fast, much faster than it seems we have the capacity to recognize and acknowledge; but it is also long, almost longer than we can truly imagine.”
– David Wallace-Wells, The Uninhabitable Earth
“It is crazy that our banks and our pensions are investing in fossil fuels, when these are the very things that are jeopardising the future we are saving for…’
– Sir David Attenborough, A Life on Our Planet
Emissions - Equity Vs Control
The Greenhouse Gas Protocol allows for two approaches of emissions accounting; the equity share approach and the control approach.
Many companies report in line with the control approach, where emissions data is only reported for assets where the company has effective control of the operations, and this can more easily influence the level of emissions generated from these assets.
In industries where joint ventures, with complex ownership structures, are prominent (e.g. the oil and gas sector), this can potentially create an underestimation of the total GHG emissions footprint.
Case Study: A Major Oil Company
Reported Emissions (2020): Scope 1 + 2 Equity Share approach = 107,000,000 tCO2e
Reported Emissions (2020): Scope 1 + 2 Control approach = 72,000,000 tCO2e
A Major Oil Company used the lower of the two values for their Net Zero target setting.
Most clients and professionals are unaware of the smoke and mirrors used by companies that are often large positions in their portfolios.
Which Path Are We On?
The Shared Socio-economic Pathways are a set of 5 scenarios used by climate scientists, economists and energy system modellers to examine how global society, demographics and economics might change over the remaining course of the 21st Century. They also form a useful basis for investment managers to assess the potential impact across asset classes and help us to identify themes that will be resilient in challenging environmental and economic conditions.
SSP2 is the ‘Middle of the Road’ scenario that would see medium challenges to climate change mitigation and adaptation. This globalised and collaborative world would follow a path in which social, economic and technological trends do not shift from recent historical patterns. The descriptive sounds like a pre-pandemic and pre-populist World where global superpowers shared the ambitions of the Paris Agreement.
Where we find ourselves today feels less certain and more fractured. SSP3 is described as ‘A Rocky Road’ of regional rivalry where concerns about competitiveness and security are in the foreground with a resurgence of nationalism. In this scenario countries are focused on achieving energy and food security goals within their own regions. Economic development is slow, consumption is material-intensive, and inequalities persist or worsen. This feels like a more accurate portrayal of our current global economic landscape.
If we are on a SSP3 trajectory, then we should expect to see any unchecked physical climate risks escalating with global temperatures rising rapidly and the economic costs of adaptation increasing. There are however reasons to be hopeful and the SSPs are humanity’s best estimates, we have it in our power to direct capital to assets that are committed to the energy transition and that are investing directly in solutions that will mitigate global emissions.
Resilient Charts
Four Charts of the Future
Sometimes the sum of scientific knowledge is best expressed visually, as sustainable investment managers we see the signals loud and clear, our goal is to help clients preserve and grow their wealth whilst making a positive environmental and social impact with their capital, our resilient approach aims to give future generations the best chance of sustainable prosperity in a habitable world.
Contact Us
START YOUR RESILIENT JOURNEY
Our team of resilient investment professionals would be delighted to hear from you, whether you are an ardent environmentalist, a social impact champion, a trustee or professional wanting to understand how the nature of fiduciary duty is changing or simply out of curiosity.
Our shared knowledge and experience tells us that portfolios can be managed sustainably and that in doing so risks can be mitigated, returns can be generated and wealth can be used to make a meaningful positive impact.
If you’d like to take a first step we would be pleased to conduct a sample carbon review on your existing portfolio.
