As investors seek to understand the financial aspects of transitioning to a low-carbon economy, Wellington Management Co. LLC is going straight to the experts.
Wellington is collaborating with Massachusetts Institute of Technology's Joint Program on the Science and Policy of Global Change to enhance its own research and to learn more about the various transition pathways for industries and economies.
It is not Wellington's first go at integrating climate science and asset management. In 2018, it joined forces with Woods Hole Research Center, since renamed Woodwell Climate Research Center, to create quantitative models for assessing climate risk. The $484.2 billion California Public Employees' Retirement System, Sacramento, is part of the collaboration, helping to test-drive the lessons learned by applying it to its portfolio.
The collaboration with MIT is now tackling transition risk. Natural and social scientists at MIT will model climate change projections under various environmental, economic and policy scenarios, with two goals: mapping decarbonization pathways for corporate operations, supply chains and products, and assessing the potential economic impacts.
MIT will look at everything from technology changes to policy actions on the global and local levels to better understand how potential decarbonization paths could impact investments, said Sergey Paltsev, the program's deputy director.
With technology and policy "moving really fast," said Chris Goolgasian, Wellington's director of climate research, "if we can get the sectoral, regional and country implications of different pathways down, that will help investors in those sectors," he said.
Experts from Wellington and MIT and industry analysts of sectors most impacted by climate change will meet monthly throughout 2022 for updates on the research agenda. Wellington clients will benefit as lessons learned are integrated by Wellington in investments and new products, along with the physical-risk findings from Woodwell.
The MIT research should also enrich asset managers' decarbonization engagement practices, Mr. Goolgasian said.
Wellington manages more than $1.4 trillion in 60 countries. It is a founding member of the Net Zero Asset Managers initiative targeting net-zero emissions across all assets under management by 2050 or sooner.
