Climate investing

Urgency

Climate change is the biggest challenge facing humanity. The world is not on track to limit global warming to 1.5 degrees Centigrade by the end of this century, leaving the planet vulnerable to more extreme weather conditions. The human and economic consequences may be incalculable. We can’t leave saving the planet to future generations: we must act now.

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77%

of global investors see climate change as a key theme in their portfolios by 2025-2026

Climate change has become increasingly important to investors’ investment policies, and this is set to continue. In our 2024 Global Climate Survey, 77% of all investors surveyed said they expected the issue to be central to, or a significant part of, their investment policy in the years up to 2026, up from 62% making such a commitment today.

The survey shows that Asia Pacific investors have overtaken their counterparts in Europe in making it a priority in 2024, with 79% now doing so. In projections for two years’ time, Europe gains back the baton, with 89% forecasting that it will be central to investment strategy.

Globally, the average figures took a slight knock due to declining interest in North America, following a backlash against ESG investing amid the energy crisis of 2022-2023 in which fossil fuel use rose. Enthusiasm there, though, it set to rise again over the coming two years to more than half of North American investors.

Climate change is increasingly central to investment policy

Climate change is increasingly central to investment policy
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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. More than three billion people now live in areas that are “highly vulnerable” to climate breakdown, and half of the global population now experiences severe water scarcity for at least part of the year, according to the IPCC. It is set to create refugees and drive displacement across coastal regions, and in the South Pacific. The issue has brought some memorable quotes from people who in some cases have dedicated their life or work to try to combat it.

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Take Sir David Attenborough, for example. The 97-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 virtually all the hottest years on record occurring in the 21st century, 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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The concept of Earth being our only home, and one which we must therefore save at all costs, was neatly put by French President Emmanuel Macron, who said:
“By polluting the oceans, not mitigating CO₂ emissions and destroying our biodiversity, we are killing our planet. Let us face it, there is no planet B.”

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There is broad consensus 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. 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 charts that tell it all

This chart from the Intergovernmental Panel on Climate Change (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 blue-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.

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Source: WRI

These two charts show how much damage has been done over the last two centuries. While the industrial period effectively began with the advent of steam power in the 1780s, reliable data only goes back to 1850, which is now used for analysis.

The first chart shows how global surface temperatures have increased to at least 1.1 degrees above pre-industrial levels, creating the warmest multi-century period in more than 100,000 years.

NASA’s own research puts the level of global warming even higher, at 1.17 degrees in 2023 than the long-term average for the time of year, and up to 1.36 degrees in total since the industrial era.

The second shows how greenhouse gas concentration levels are now at their highest levels since prehistoric times. Since emissions are still rising, these concentrations are expected to increase.

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, though efforts to combat it with net zero 2050 implementation plans have improved. That’s the key message from the 2023 UN Intergovernmental Panel on Climate Change (IPCC) report.

“Human activities, principally through emissions of greenhouse gases, have unequivocally caused global warming, with global surface temperature reaching 1.1°C above 1850–1900 in 2011–2020,” the report says.

“Global greenhouse gas emissions have continued to increase, with unequal historical and ongoing contributions arising from unsustainable energy use, land use and land-use change, lifestyles and patterns of consumption and production across regions, between and within countries, and among individuals.”

“Global greenhouse gas emissions in 2030 implied by nationally determined contributions (NDCs) announced by October 2021 make it likely that warming will exceed 1.5°C during the 21st century, and make it harder to limit warming below 2°C.”

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