The SMART Climate Approach

Climate risk falls into two categories:

TRANSITION RISKS: these include the potential impacts of changes in policy, regulation, and litigation, etc. from moving to a low carbon economy. These risks are increasingly well understood by companies and investors alike, increasingly reflected in ratings and index creation.

PHYSICAL RISKS: these risks are derived from the impacts of increased heat, drought, wildfires, and hurricanes, etc. At present, these are less well understood, less likely to be reflected in ESG data and therefore less likely to be priced into investments. However, innovative new data sets and analytics are coming to market across asset classes.

Our SMART Climate UMA Models include managers whose investment theses and philosophies account for physical climate risks, meaning these strategies may look very different from existing benchmarks.

Strategies focused only on transition risk generally have low tracking error compared to traditional benchmarks. As a result, they will likely react similarly to the indexes during a climate “event.”

Wherever possible, we allocate to managers who are exploring climate scenarios and their potential physical and broader socioeconomic impacts.

ESG UMA Models

Our ESG UMA models are comprised of actively managed Separate Accounts (SMAs), across four risk iterations, and an all-equity version. These portfolios utilize Environmental, Social, and Governance (ESG) data to select “best-in-class” separate account managers to create ESG integrated core portfolios that are tailored for risk tolerance and designed for above average risk-adjusted returns.

These portfolios include all of the potential benefits of UMA implementation technology, such as market-leading tax overlay capabilities, including customized tax-loss harvesting and flexible transition management from existing investments. The model minimum is $300K.

ESG Mutual Fund Models

The SMART ESG Portfolios are a family of global climate aware investment allocation strategies. Environmental, Social, and Governance (ESG) data is used to select mutual fund managers and ETFs. The models serve as a core portfolio holding, tailored for risk tolerance, and designed for above average risk adjusted returns. We select managers with a strong performance track record, sophisticated understanding of ESG integration and a driving commitment to sustainability principles within their firms.