Scotia Securities Inc. wants to take advantage of companies that are ahead of the curve on climate change. With this goal in mind, it launched its new Scotia Global Climate Change Fund today.

“Climate change presents the greatest risk we’ve seen in the history of the capital markets, but most importantly, an enormous opportunity,” said Bill Page, vice-president of State Street Global Advisors Ltd., and lead manager of the fund, at a luncheon presentation today in Toronto.

The fund is advised by State Street’s environmental, social and governance investment team, which Page heads up. It aims to profit from those companies adopting technological and environmental practices to address the implications of climate change.

“There are not many vehicles globally for climate change,” said Page. “It will affect all portions of the capital markets; we believe it will affect all economic sectors.”

He pointed out that the climate change fund is not strictly speaking a socially responsible investing (SRI) fund, but says it will appeal to SRI investors.

The new fund is benchmarked to the MSCI World index and the KLD Global Climate 100 Index. “We’re going to have a fair amount of tracking error relative to the MSCI World Index,” said Page. “We anticipate somewhere between 3 and 7%. Right now in the portfolio, we are at 6% tracking error. That is due to the fact that we manage to these nine themes.”

The nine themes are the major issue areas the fund is managed to. According to the company, the fund diversifies across the nine climate-related areas, which allows it to capitalize on a wide range of opportunities while reducing the risk associated with investments in only one or two of these areas. “The way we think about this portfolio is environmental investing, managing to the nine themes,” said Page.

The themes range from clean fuels and efficient transport, to water and environmental finance. The fund managers emphasized that the reason for such a broad-based investing approach is linked to their belief that climate change will touch on every economic sector.

Page said the themes will change over time as the issues change and added that the team remains “cognizant” of the 10 economic sectors.

So what does this mean in terms of asset allocation? “The biggest underweight will be financials,” said Page. “We are going to have significant underweight to financials, consumer discretionary, durables. We are going to have significant overweights to industrials and the materials categories.”

The managers‚ investment process includes an environmental ranking, a financial ranking and analyst research and weighting, as well as consideration of overall portfolio construction, according to the fund managers.

The aim is to find companies using these screens that are developing new products and services related to climate change, or those that are implementing better environmental practices, which then put them ahead of their peers which will spur greater shareholder returns down the road as climate change legislation hits.

Scotiabank chief economist Warren Jestin was also on hand this afternoon, to provide his broader economic perspective on climate change. “It is unambiguous that environmental remediation will be the fastest growing industry in the world over the next 20-25 years,” he concluded.

The new climate change fund is part of a broader push from Scotia to gain market share in Canada’s mutual fund business. The bank has been adding mutual fund advisors to its branches and hired money mangers John Varao, Shane Jones and John Kellett away from the Royal Bank last spring to help grow its asset management business.

Scotia Global Climate Change Fund is available in class A, advisor class, class F, and class I units.