Climate investing

Urgency

Climate change is the biggest challenge facing humanity. Rising sea levels will displace millions of people, and the economic consequences will be catastrophic unless something is done. We can’t leave saving the planet to future generations: we must act now.

86%

of investors see climate change as a key theme in their portfolios by 2023

In the last two years climate change has become increasingly important to investors’ investment policies and this is set to continue.

This represents a huge increase from only three years ago, when only a third of investors put climate change at the centre, or as a significant factor in their investment policies.

This major shift shows how investors now accept the case for co-ordinated, global action to stop a catastrophic rise in global warming.

Climate change is rapidly becoming central or significant to investment policy

Climate change is rapidly becoming central or significant to investment policy

Data may not sum to 100% due to rounding​
Source: 2022 Robeco Global Climate Survey

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The future of humanity and indeed, all life on earth, now depends on us

Climate change is an increasingly emotional subject, not least if you are living at the sharp end of it. In the past few years alone we’ve seen uncontrollable wildfires in Australia, severe hurricanes in the US, and flooding all over the world. Thousands have died, seen their homes destroyed, or been displaced. The issue has brought some memorable quotes from people who in some cases have dedicated their life or work to try to combat it. While it is the politicians that hold the real power in being able to enact measures that can tackle global warming, others can be just as influential.

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Take Sir David Attenborough, for example. The 94-year-old naturalist and broadcaster had dedicated a seven-decade working career to highlighting ‘Life on Earth’ (as his seminal work suggests) and the fragility of it. His moving documentary, ‘A Life on our Planet’, outlines how humans have caused immense destruction to the planet. It produced a memorable warning shot to mankind:
“Never before have we had such an awareness of what we are doing to the planet, and never before have we had the power to do something about that… The future of humanity and indeed, all life on earth, now depends on us.”

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With nine of the ten hottest years on record occurring in the last decade, the effects of climate change are now impossible for anyone to ignore. As former US President Barack Obama said:
We are the first generation to feel the effect of climate change and the last generation who can do something about it.

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This is both a challenge and an opportunity, as President Joe Biden said when taking the US back into the Paris Agreement in January 2021. His policies if enacted by Congress would invest USD 2.2 trillion in combatting global warming, saying:
“Climate change is the existential threat to humanity. Unchecked, it is going to actually bake this planet. This is not hyperbole. It’s real. And we have a moral obligation.”

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Virtually everyone agrees that the action needed to stop greenhouse gases from entering the atmosphere is decarbonization. This requires international cooperation and treaties to universally – rather than unilaterally – agree to decarbonizing the industries we take for granted, such as fossil fuel. Former German Chancellor Angela Merkel’s clarion call reflected the urgent need to move beyond words alone:
“We must now agree on a binding review mechanism under international law so that this century can credibly be called a century of decarbonization.”

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At Robeco, we believe we are also part of the solution by investing in companies that make a difference. And as our CEO Karin van Baardwijk makes clear, this is our top priority:
"We have to recognize that the effects of climate change are also top-of-mind for us all, not just as investors but as citizens too. We know that the low-carbon transition is disruptive with impact on companies that can’t keep up. However, at the same time, it’s providing opportunities for those that can."

Climate investing is more than just the next big thing

Lucian Peppelenbos (Climate Strategist) and Carola van Lamoen (Head of Sustainable Investing) look at climate change and climate investing from all angles. Listen to the trailer or to the full 25-minute podcast.

The chart that tells it all

This chart from the IPCC reflects the 90 scenarios in which CO2 emission pathways meet the goal of limiting the increase in global warming to less than 1.5°C in the coming decades. Each incorporates different assumptions about mitigation measures, technological advancements, political priorities, societal preferences and economic development. Scenarios that fall within the pink-shaded area fall within the 1.5°C limit by around 2050 with little or no overshoot; the scenarios in grey have a high overshoot, and fall back within the 1.5°C limit before 2100.

Global total net CO₂ emissions

Global total net CO₂ emissions

Source: IPCC, October 2018, Special Report no. 15

The 1.5°C pathways all have in common a reduction of CO2 emissions to net zero, the phasing out of unabated coal use by 2050, and a reliance on renewables for most of the energy supply.

Four archetypal model pathways are highlighted in the chart: P1 is the most disruptive, with a rapid reduction in emissions towards net zero based on a fast reduction in demand for carbon-intensive products.

P2 meets the emissions target in a way that maximizes the contribution to the SDGs; like P1, it is ambitious in terms of changing consumer patterns.

The P3 pathway is a sort of middle-of-the-road scenario, with limited change in social and economic trends and a high reliance on carbon-reduction techniques such as bioenergy with carbon capture and storage. The riskiest of the four archetypes is P4: it delays the most and results in overshoot, and therefore requires aggressive compensatory action to bring emissions within target.

IPCC warns we’re not on track to limit global warming despite having the tools and know-how

We are not on track in tackling global warming, but we do hold the answer. With the right leadership, the world can avoid dangerous climate change. That’s the key message from the just-published UN Climate Science Panel IPCC report.

IPCC warns we’re not on track to limit global warming despite having the tools and know-how

Visit all the sections of our Climate investing platform