Sustainable Investment Jan 2021
Posted on 1st March 2021 at 15:33
The Paris Climate Agreement signed in 2015, was a defining moment in the worlds response to tackling climate change. For the first time ever, countries from all over the world came together to sign a single agreement aiming to cut greenhouse gas emissions, and to limit the global average temperature rise to well below 2 degrees pre-industrial levels. Signed by almost 200 countries, the global aim of responding to climate change and the transition to a net zero carbon world will surely define the decades to come. To achieve these ambitious targets, large scale transformations across all sectors of the economy are beginning to take place. These large scale changes provide new avenues for investment, as clean renewable technologies and low carbon solutions are set to become increasingly influential in the years to come. This therefore provides an exciting opportunity to invest in companies that will be at the heart of the socio- economic transformation that is set to shape our future.
As the goal of establishing net zero carbon emissions by 2050 is now written in UK Law, this is driving huge changes in energy production, housing, transport, industry and agriculture. For the first time ever, this year, renewable energy made up almost half of Britain’s electricity generation. This is only set to increase as the Government steps up its plans to “Build Back Greener”, and to establish the UK as a world leader in clean wind energy. The plan is to grow Britain’s offshore wind farms fourfold over the next decade, as the government aims for a massive expansion in renewables in order to set us on a path towards a ‘green industrial revolution’. Over the past four years, the UK government has provided £5.8 billion of International Climate Finance to help develop pioneering technology overseas. In the next five years, the UK is doubling this amount to £11.6 billion, as the government seeks to invest more and more in companies at the centre of the fight against climate change, as we look to move away from the use of fossil fuels.
In the latest report by the global sustainable investment alliance, it is estimated that globally, socially responsible investments grew by 34% to $30.7 trillion over the past two years. This signifies that an environmental, social and governance response to investing is becoming much more mainstream and is now deeply embedded in investment decision making. Further evidence of this can be seen by the fact that the environmental products and services industry is now growing at an annual rate of 7%, double the rate at which the world economy is expanding. The Paris Climate Agreement has therefore changed the regulatory landscape, re-framed public policy and transformed societal and economic activity. Investors are increasingly recognising the importance of the financial sector in aiding the transition to a net zero carbon world, with businesses now being held accountable for their impact on the environment, with those that are environmentally sustainable set to benefit the most in the years to come.
To conclude, it makes sense for investors to consider what sectors will drive economic growth in the years to come and the evidence is clearly showing that sustainable investments will play a significant role. Please contact us for more information on our fund recommendations on this theme.
George Hitchcock
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