The Essentials of Climate Investing

Climate change caused by rising levels of CO₂ in the atmosphere is seen as the greatest threat facing humanity.

Learning objectives

• How global warming causes life-threatening climate change

• The momentum built by international protocols since the 1980s

• The Paris temperature goals and the IPCC emissions targets
  

Climate change can only be combatted by reducing greenhouse gas emissions, which has led to national carbon targets and net zero pledges.

Learning objectives

• How emissions cuts are vital to achieve the Paris goals

• The importance of national targets and net zero pledges

• How investors are tackling high emitters using engagement
  

Climate change is an issue of ‘double materiality’ for investors, presenting both transition risks and opportunities that require pathways for change.

Learning objectives

• How double materiality combines top-down with bottom-up

• The transition risks (and opportunities) that companies face

• Why Paris alignment of investments can help meet goals
  

Decarbonizing a world that still relies on plentiful fossil fuels is not easy, while issues such as low carbon pricing and deforestation remain obstacles.

Learning objectives

• The uphill struggle in replacing coal, oil and gas with renewable energy

• How carbon pricing is too low and not widespread enough to work yet

• The cost of replacing infrastructure and the data dilemma in measuring emissions

The biggest risk for investors in climate change lies in not seeing the opportunities, while moving to a lower-carbon economy will produce many winners.

Learning objectives

• How renewable energy offers the crown jewels in decarbonization

• The rise of electric cars is part of a wider electrification drive

• Green hydrogen is a solution, while carbon capture is expensive

Investors can play a huge role in assisting the low-carbon transition, through their ability to allocate money, and by using active ownership.

Learning objectives

• The need to steer capital towards companies committed to decarbonization

• How ESG integration, voting and engagement can effect change

• Why collaborations are increasingly successful in targeting high emitters
  

There are many ways to invest in solutions to combat global warming, from thematic investments to more bespoke climate funds.

Learning objectives

• How themes such as renewables and electrification are attracting cash

• The rise of impact investing, green bonds and environmental investing

• A new wave of climate strategies that follow specific benchmarks

Many of the solutions for climate change are coming from private enterprise. Companies are developing alternatives to fossil fuels and innovative means of decarbonizing the world. Most of these are open to investors who want to make returns while also doing their bit to combat global warming.

The transformation needed to combat climate change has already begun, and can be seen on a national, sectoral and corporate level.

Learning objectives

• How two countries have become world leaders in renewables

• The engagement that brought change to the gas-guzzling auto sector

• The companies taking decarbonization seriously in Asia and Europe

National efforts to replace fossil fuels with renewables lie at the heart of reducing global warming, since electricity generation accounts for 25% of all emissions.³⁵ This is particularly important for coastal countries that will bear the brunt of rising sea levels if the issue is not tackled.

In this final chapter, we summarize the main points of what we have learned so far: