From bushfires to retreating glaciers – climate change sometimes feels overwhelming. But out of adversity comes opportunity. We can invest in the companies that are part of the solution, from renewables to smart technology.
of investors globally say they will focus their decarbonization process on global equities. Domestic equities, corporate debt and private markets are also expected to be a focus for decarbonization in the next one to two years.
of investors see real assets as a focus for decarbonization. This makes sense, as the generation of energy to power lighting, heating and cooling for buildings in the latter sector (in)directly produces carbon emissions.
Global and domestic equities confirmed as the preferred routes for investors globally to focus their decarbonization process in the next 1-2 years.
This is also reflected by their preference when it comes to biodiversity. The main difference here is that while real assets are preferred for decarbonization, private markets and corporate debt is the third choice for biodiversity after global and domestic equities.
Investors globally are employing a growing holistic approach to decarbonization as year on year they are expecting to make use of a greater variety of asset classes to implement decarbonization going forward.
The winners and losers in the low-carbon transition
Few things are more disruptive than losing your business. Just as trains replaced horses and digital photos replaced film, those companies not taking climate change seriously are unlikely to survive.
Meeting net zero carbon goals by 2050 requires decarbonization on a global scale. Its scope will range from switching from coal-fired power stations to wind farms, to electrifying vehicles, insulating every building and making agriculture more efficient.
This will produce many winners, particularly among those companies that form part of the many technological solutions to climate change. These can be found in arenas such as renewable energy infrastructure, carbon capture systems and recycling techniques.
Ultimately it means moving to a circular economy to reduce the manufacturing processes that generate carbon in the first place.
And there will also be losers – those companies that are too slow to adapt to the need to move to lower-carbon business models over the coming decade. As regulation gets tougher and consumer tastes change in favor of more climate-friendly products, these companies will eventually be the ones still selling horses when the railroad has arrived.
Decarbonizing as the yardstick
Separating the wheat from the chaff is the job of any asset manager who is serious about performance. One way in which this is done is by measuring how well a company is doing in decarbonizing its business model, using metrics that measure greenhouse gas emissions, energy used for heating and waste produced during the production process.
For example, many car manufacturers have already announced plans to have an all-electric model range by 2030, to avoid their businesses becoming obsolete when governments eventually ban petrol and diesel vehicles from the roads. These will be the winners, while auto makers still offering internal combustion engines in a decade’s time are likely to be shunned by investors.
Airlines offer a different example. Battery-powered aircraft are currently not possible, since the weight of the battery needed to generate the power for take-off would be three times the weight of a modern jetliner. Instead, they are switching from four-engine aircraft to more fuel-efficient twin-engine planes, and many have announced plans to ditch their fleets of the iconic four-engine Boeing 747 jumbo jets.
For energy companies, it is a different story again, since the world will remain reliant on oil and gas for many years to come. This means the winners in this industry are increasingly viewed as those whose business models are transitioning towards wind and solar power, for when the oil and gas either runs out, or can no longer be sold.
Hydrogen power — between hype and hope
Decarbonizing national economies is central to government plans. But significant challenges sit between hydrogen’s potential and its uptake and use across sectors. In road transport, better economic and more sustainable options already exist.
Pioneers: from green certificates to climate bonds
In times of great change, you need to be able to rely on people who not only have the passion for sustainability, but also a long track record of implementing it.
As a pioneer of sustainable investing, Robeco has been at the forefront of providing sustainability solutions since the mid-1990s, when the environmental movement first started to gain ground. Our dedication to creating investment products that can bring about change continues to this day.
Here we take a trip down memory lane to highlight the many firsts that Robeco has notched up:
In 1994, Robeco launched the world’s first sustainable investment product, the ‘Groencertificaten’ (Green Certificates), for Dutch retail investors.
Five years later, we launched Europe’s first dedicated SI equity strategy, in 1999.
The use of engagement began in 2005 with the creation of a bespoke Active Ownership team dedicated to voting at shareholder meetings and talking to companies about improving their ESG credentials.
Routinely integrating ESG factors into the investment decision-making process started in 2010; we are now the only mainstream asset manager in the world to use sustainability principles across the entire range of fundamental equity, fixed income and quant strategies.
Further innovation with the launch of impact investing strategies came along in the 2010s, targeting, among other things, renewable energy and the Sustainable Development Goals, including SDG 13 on climate action.
In 2020, Robeco launched the world’s first climate change fixed income strategies, investing in companies that make a direct contribution to tackling global warming. Our Climate Global Credits strategy invests in corporate bonds, while the Climate Global Bonds strategy invests in both credits and government bonds.
All of these developments have been backed by firm policies that are based on a commitment to help combat climate change. In line with the launch of the climate strategies, Robeco also committed to achieving net zero greenhouse gas emissions across all its assets under management by 2050.
As for the future, we will continue to innovate, particularly in the areas of climate change, green bonds and the SDGs.
Due precisely to these storage and transport issues, most grey hydrogen used by utilities and industries used existing natural gas pipelines to deliver the gases needed to produce grey hydrogen at stationary plants on site. Graphic source, Inside EVs
Investing in bonds and striving to keep the global temperature rise well below 2°C.
Robeco’s first sustainable investment portfolio dates back more than 20 years. Today, from fixed income to equity solutions targeting the long-term effects of global warming, we’re also at the forefront of climate investing. By diving deeper to understand dynamics and impact, our comprehensive sustainability approach leads to better-informed investment decisions that also look after the world we live in.
How regulation promotes sustainable investing
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