City insiders have issued a final warning to investors and fund managers in the wake of the latest devastating climate change report.
The investment industry “must act aggressively, swiftly and collaboratively” in the few months until the United Nations (UN) Cop26 summit – seen as one of the last opportunities to do so.
The call to arms follows this week’s report from the UN’s Intergovernmental Panel on Climate Change (IPCC) – which confirms the “red code for humanity”. He states that only immediate and extreme reductions in carbon emissions in societies around the world can now prevent the most catastrophic impacts of man-made climate change.
Even with such action, designed to limit global warming to 1.5 degrees above pre-industrial levels, historic inaction and political play means certain effects, including significant sea level rise and weather events. more frequent extremes, are now blocked.
“The landmark UN report on climate change revealed the devastating reality we are likely to face in just 20 years,” said Gemma Woodward, director of responsible investment for investment manager Quilter Cheviot.
“Even in the best case of large reductions in greenhouse gas emissions, the world is expected to temporarily reach 1.5 ° C of warming and continue to fight extreme weather events.
“The new report suggests that even with ambitious interventions such as Boris Johnson’s 10-point plan to launch a green industrial revolution in the UK, temperatures are expected to continue to rise until ‘at least’ 2050.
“New evidence suggests that if we reduce emissions to net zero and keep them there, warming will stabilize. These data must usher in a new era where climate considerations trump all else.
“These latest data should serve as a stark reminder why investors need to look to the future and consider sectors such as renewable energy infrastructure to support global ambition.”
Gabriela Herculano, co-founder of the iClima Global Decarbonisation Enablers UCITS ETF said: “The IPCC report is yet another clear warning that we are running out of time and need to act quickly, aggressively and collaboratively. The next few months leading up to Cop26 are crucial and give us the opportunity to focus on the key points that need to be agreed quickly. First, we need a clear ban on new coal-fired power plants.
“As Carbon Tracker pointed out last month, China, India, Indonesia, Japan and Vietnam are still planning to build 600 new coal-fired power plants. Renewable energies may be more price competitive in these jurisdictions, so alternatives are in place. In addition, we need a global agreement on a deadline for the decommissioning of all existing coal plants. “
At the same time, ethical funds with strong environmental, social and governance (ESG) mandates continue to outperform unethical options as the appetite for sustainable businesses grows as sanctions and reforms hamper those who do not. do not evolve.
Recent data from comparison site Moneyfacts.co.uk showed ethical funds overall returned 19.9% in the year through early July, compared to 17.9% for unethical funds.
Out of 23 peer sectors that include ethical funds, 13 sectors produced an average performance of ethical funds above that of unethical funds, based on last year’s data.
Moneyfacts highlighted a number of external studies, including from the Ministry of Business, Energy and Industrial Strategy, which show that consumers build the confidence of their investors and want to invest more ethically, many of which them undergoing a change in behavior when it comes to tackling climate change. .
“The assumption that choosing an ethical fund can mean a sacrifice in return over an unethical fund is wrong and has been for many years,” warned Rachel Springall of Moneyfacts.
“Ethical funds outperformed unethical ones in 13 of 23 sectors based on the latest year-over-year performance figures.”
Joshua Hewitt, Certified Financial Planner at independent financial advisor Kellands, added: “While clients may not be able to engage in the conversation about sustainable investing, we find that the vast majority are willing to consider the options available to them. them.
“Clients who may not have a strong belief in investing sustainably are increasingly willing to consider their opportunities. “