On 12 December 2015, 196 countries committed to a universal pledge to reduce their carbon footprint. This is already a success in itself.
This international agreement aims to limit global warming to +2°C and has the even more ambitious target of pursuing efforts to limit the increase to 1.5°C. Furthermore, by 2050, we should all be living in a carbon-neutral world. Another positive result of this agreement lies in the increased collective awareness of climate change issues and the linked recognition of the sense of urgency to move to a low-carbon world.
It was confirmed to investors that environmental issues would gather greater momentum and assume more significant materiality.
However, this ambitious diplomatic agreement is not (yet) binding. At this stage, there are no enforceable sanctions if targets are not reached but there is that implicit pressure from the parties (name & shame) and monitoring & reporting foreseen every 5 years. The agreement also foresees technological and financial support for developing countries to help them contribute to the international efforts. If this doesn’t materialize (100 bn USD annual provision foreseen by 2020),developing countries can use their get-out clause.
There is still a whole series of operational aspects which need to be discussed and answered at COP22 in November 2016 in Marrakech in order to capitalise on all the good intentions.
In the meantime, Candriam’s SRI approach is highly relevant. We do not only monitor the carbon footprint of our SRI portfolios, we also surpass industry standards: our proprietary in-depth analysis of companies in all sectors examines both the carbon intensity of a company’s business model and environmental practices across all operations. By selecting companies that are environmental leaders in their field we are driving better eco-efficiency and fostering the transition to clean or renewable energy, while simultaneously creating positive peer pressure on other companies in the sector to do the same.