13 OCT.

2015

Asset Class , SRI

Climate change at the heart OF YOUR INVESTMENT CONCERNS

A few weeks short of the 21st session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change, and as climate change is impacting the world a little more each day, it is becoming increasingly important that investors from all backgrounds see their investments from a different perspective.

Your role as an investor is not only essential in addressing this major challenge, but vital in relation to climate refugees, both for present and future generations.

Tipping the scales

Just as a river is made up of billions of drops of water, the impact of the economic activity on our environment is the sum total of a multitude of economic choices. 40% of the companies listed on stock markets (excluding the financial sector) are responsible for 75% of CO2 emissions worldwide. Both individual and professional investors are therefore extremely well-placed to tip the balance in favour of a more sustainable economy.

Identify the critical sectors

The fight to reduce the carbon footprint of our economies must be carried out in a cross-sectoral and rigorous way. The sectors that are doing most harm to the planet are well known: Energy, Mining, Utilities such as the distribution of water, gas or electricity, Transport, Automobile and Chemicals. But each sector requires a very rigorous analysis of the whole value chain. And each business should be the subject of a specific analysis: for instance, banks funding polluting activities must be excluded from a sustainable portfolio. Investors will therefore realise that a comprehensive company analysis from a climate change perspective requires very specific skills, and the choice of a sustainable investment depends first and foremost on the quality of the screening conducted by experienced professionals.

Choose the best with a global vision

As part of the management of our sustainable funds (SRI) we apply a “Best-in-Class" approach, which involves selecting the "best players" in each sector, i.e. companies that exhibit the most successful credentials in the fight to reduce greenhouse gas emissions. In extending this reasoning to sectors such as Energy – which consist in polluting companies, but are essential to the proper functioning of the economy – we systematically favour companies in the specific sector of energy efficiency. The fact that our approach has remained unchanged during the recent fall in the price of fossil fuels demonstrates the strength of our commitment in this area. While renewable energies have temporarily become less competitive than fossil fuels, the Green growth trend remains strong in the long run and is supported by regulatory developments around the world.

Anticipating future trends

In an increasingly interconnected world, we would draw attention to several climate change-related themes: in addition to energy efficiency, we can mention the increasing scarcity of raw materials as a whole, demographic changes, health and well-being, as well as the development of new information and communication technologies which, among other things, help avoid many unnecessary journeys. These themes fall within our broad analytical framework, and prove to be particularly promising in a long-term investment.

 

Ben Peeters
Senior Investment Specialist SRI