CLIMATE CHANGE
THE ‘SOLVERS’: INVESTING IN SOLUTIONS TO CLIMATE CHANGE The urgent need for action on climate change could prove a defining theme for global investors in the 2020s – propelling sustainability leaders into the limelight, says Randeep Somel, fund manager at M&G Investments.
“The simple truth is that transformational action on climate change can no longer be postponed.”
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When investors reflect on the 2010s, one trend will probably shine bright in the memory: the ascending dominance of ‘Big Tech’. The last decade has seen US technology companies flourish. They have taken commanding positions in their respective areas, including social media and online search, and disrupted other markets. Their rise has been epitomised by the so-called ‘FAANG’ stocks: Facebook, Amazon, Apple, Netflix and Alphabet (Google’s parent). As confidence in their long-term prospects rose, their share prices – and those of peers – soared during the 2010s. The trend was catalysed further during the lockdowns of 2020, when global society became more dependent on technology for work and play, propelling the US stockmarket to new highs. Irrespective of whether Big Tech continues its ascendence, there is an emerging theme that I believe will define global markets over the coming decade: the emergence of sustainability as an immediate and overarching priority for investors.
temperature to 1.5°C – a level at which the risks and impacts of climate change are lower. To meet this goal, agreed in the 2015 Paris Agreement, we must achieve net zero greenhouse gas emissions worldwide by 2050. Rising to the challenge demands deep and far-reaching reductions in emissions across all aspects of the economy this decade. I see three key areas where companies can meaningfully help combat climate change. The first is where their activities or products directly cut emissions, either by replacing carbon-intensive inputs with renewable alternatives or by designing components and systems that improve energy efficiency. The second is where companies help make industry and transportation – which account for 35% of global emissions combined – less polluting. The third is where companies contribute to a more circular economy by designing out waste and keeping materials in use.
THE SUSTAINABILITY IMPERATIVE
THE ‘SOLVERS’
The simple truth is that transformational action on climate change can no longer be postponed. The United Nations estimated in 2019 that global emissions must fall by 7% a year on average from 2020 to 2030 to get on track to limit the increase in the world’s average surface
When it comes to making the transition to a resource-efficient, low-carbon economy, it is European companies that are at the vanguard. This should come as little surprise: Europe has arguably taken more action than other major economies to address the
