ESG: Climate Change and the Path Towards Net Zero

Decarbonisation, Net-Zero and Climate Investing

As the world begins to focus on post-pandemic issues, top of mind for both investors and politicians are the issues of climate change and the path to net-zero.

This selection of recent ESG papers is grouped around this central theme, but covers a range of different topics including portfolio construction considerations, how certain industries might approach decarbonisation, and how investors can utilise specific climate-based indices to help inform and control decisions relating to carbon exposure.

Designing a Resilient Response to Climate Change (Impax Asset Management, 2020)

Impax Asset Management outlines what assessment and forecasting tools might become available to investors over the next few years. These are likely to include better analytics which will help in risk assessment, assessment of key assets and climate science itself.

Portfolio Approaches to Net Zero (BlackRock, 2021)

With asset managers, asset owners and public companies increasingly committing to net zero emissions by 2050, BlackRock explores portfolio pathways to reaching this goal.

Decarbonising the Global Steel Industry (Federated Hermes, May 2021)

Federated Hermes looks at the options available for steelmakers to decarbonise, and how they can achieve zero-carbon emissions.

Net Zero Commitments Versus Science-based Targets (MFS IM, Jun 2021)

MFS Investment Management outlines the differences between science-based emissions targets, net zero commitments and company-defined emissions goals. They examine the rigour and likely compliance with each approach and conclude that even science-based targets, thought to be the most robust measure, exhibit several shortcomings.

Passive Investing 2021 — Rise of the ‘S’ in ESG (CREATE-Research/DWS, 2021)

This report from CREATE-Research and DWS highlights the ‘S’ in ESG and suggests that investors need to be better acquainted with the social aspects of ESG, before starting to ‘build back better’.

The Big Book of Climate Investing (Robeco, 2021)

Robeco’s Big Book of Climate Investing outlines both the risks and opportunities available to investors as economies and industries move towards net zero emissions status.

The Tectonic Shift to Sustainable Investing (BlackRock, 2021)

In BlackRock’s view, the economic benefits of mitigating the impact of climate change can outweigh the economic costs of doing so. They believe that avoiding climate-related damages will help prevent economic degradation and improve the returns of risk assets. And they expect the markets to reward companies, sectors and countries that adjust to the post-carbon transition and to penalise those that don’t.

Stakeholders in the Just Transition (Amundi, 2021)

Amundi’s paper looks at how consumers should feature in any ‘just transition’, believing them to have been largely overlooked. Financial services companies have a key role to play, with better corporate engagement being one way of demonstrating their commitment to a transition fair to all stakeholders.

Climate Scenario Alignment and Net-Zero (S&P Dow Jones Indices, 2021)

S&P Dow Jones Indices highlights their PACT (Paris Aligned and Climate Transition) Indices which may assist investors in their decarbonisation decision making.

Carbon Credits (Aviva Investors, 2021)

Aviva Investors outlines several different approaches to carbon offsetting, particularly as it applies to forest management.

A Sustainable Future in Global Emerging Markets (Franklin Templeton, 2021)

Franklin Templeton’s Emerging Markets Equity team investigates the opportunities in emerging markets by taking both a top-down and bottom-up approach.