Where have all the wellies gone?

If you’re like me, you might have spent last month jealously looking at people having the time of their lives at the music festival Glastonbury. I normally can’t watch due to enormous levels of FOMO (Fear Of Missing Out), but this year was an exception.

Alongside enjoying the amazing performances (Elton John anyone?!), one thing that struck me was how sunny it was. My memories of the Glastonbury Festivals of the early 2000s are of people wading through biblical levels of mud and generally having a miserable time. But this year it was shorts, t-shirts, and sunglasses everywhere! Not a welly in sight.

It turns out it hasn’t rained at the last four Glastonbury Festivals. Searing temperatures in 2022 and 2019 dethroned 2017 as the hottest Glastonbury on record. At this year’s event, it was so hot that showers were closed to preserve water! For me, this is another example of how climate change is impacting our daily lives.

Climate change — or Climate Risk, as we like to call it within investment management — is something we try and manage within the 7IM portfolios. One way we do this is through our target to reduce the carbon intensity of our strategic asset allocation (SAA) by 30% by 2026. We target the SAA because this is the cornerstone of our investment process and influences all the portfolios run by 7IM.

This target aims to tilt our investments away from the most polluting companies and favour companies with cleaner production processes and supply chains. This doesn’t mean excluding every company with a link to fossil fuels, but it does mean removing those companies using these resources most inefficiently.

Thus far we have begun decarbonising our holdings in US equities and Global Corporate bonds, impacting more than £500m of assets. This year we have been analysing the impact of doing the same for Japanese and European equities, and aim to make further changes to portfolios when we update the SAA later in Q3.

Climate change will impact everybody over the coming years. We’ve all had moments when little details have illustrated how the weather is changing. For some of us, it might be that our local stream is running much lower than normal, or that our favourite winter coat is staying in the wardrobe that much longer. For me, it was watching 200,000 sunburnt people at Glastonbury having the time of their lives.