RESPONSIBLE INVESTMENT AND CLIMATE CHANGE



COP21 Countdown
Time until COP21

The number of investor coalitions dedicated to climate solutions is growing fast before COP21 next December in Paris. The leaders of this movement are responsible investors.
Novethic’s Research Center gives you the keys to understand why they’re acting on climate change and disentangle the links between carbon risk, stranded assets, divestment and ESG integration into asset management.


Main trends

Main trends



Growing and global engagement

More than 550 investors have made a commitment to the climate in one respect or another.

From ethical investors to responsible investors

Ethical investors refusing to invest in coal or companies with the highest greenhouse gas emissions have now been joined by conventional responsible investors.



Carbon risk and NGO pressure: two key factors

The two main factors encouraging investors to initiate engagements are the carbon risk weighing on fossil fuels and increasing pressure from civil society to replace fossil fuels by renewable energies.

The use of varied strategies

These investors are employing a range of strategies to reduce the emissions financed by their portfolios, including shareholder engagement, exclusion, best-in-class selection and theme-based investment.



Novethic report

Novethic report



The study led by Novethic’s research centre sheds light on the identity of the responsible investors behind the mobilisation on the fight against climate change. The study reviews the practices of over 550 financial players worldwide. From foundations and ethical investors divesting in fossil fuels to large pension funds leading shareholder engagement initiatives with oil companies, a broad range of strategies are being used.

Download the report



Interviews

Interviews



Covering topics such as carbon footprint, low-carbon indices and the fossil-fuel business model vs. the renewable-energy business model, the first-person accounts from observers and players brought together by Novethic for these finance- and climate-focused events are invaluable.





  • Mats ANDERSSON
    CEO, AP4




  • Stéphane VOISIN
    Climate finance expert, KEPLER CHEUVREUX




  • Dustin NEUNEYER
    Head of European Network, PRINCIPLES FOR RESPONSIBLE INVESTMENT (PRI)




  • Christine TØRKLEP MEISINGSET
    Head of ESG Research and Portfolio Manager,STOREBRAND



Agenda

Agenda



Business Climate Summit - 20 and 21 May, Paris
Find out more


Climate Finance Day - 22 May, Paris


Novethic Annual Event - 24 November, Paris


COP 21 - From 30 November to10 December, Paris le Bourget
Find out more


Key concepts

Key concepts



If more and more investors are making climate commitments, it is largely because of their full or partial acceptance of concepts that have developed across the globe in less than five years.


Carbon risk

The notion of carbon risk developed by the UK-based non-profit Carbon Tracker Initiative has gone mainstream with extraordinary rapidity. This risk is financial in nature and poses the greatest threat to the most carbon-intensive companies, starting with coal and oil producers. It posits that these companies' market valuation will shrink drastically when they can no longer continue their carbon-intensive activities. They will be in this situation if regulations combine with shifting market trends to impose maximum GHG emissions compatible with the 2°C limit on global warming.
Carbon risk is related to another concept, stranded assets.

Stranded Assets

These are assets liable to depreciation that are massively invested in extractive companies, either directly or through investment in the major stock market indices, where they are over-weighted. The value of these assets will collapse if regulations setting a 2°C limit on global warming are imposed, since this will prevent companies from exploiting their proven reserves. A drop in the value of these assets will affect all major asset owners.

Carbon footprint

This is the measure of carbon emissions produced indirectly through the various kinds of financial management. To calculate this carbon footprint, the carbon emissions of an equity portfolio are "weighed" using the emissions generated by the companies in the portfolio and the number of each company's shares held. This method of calculation may be adapted for government bonds or other types of investment such as real estate.

Go Fossil Free

This international civil society movement is using the carbon risk concept in campaigns like those conducted against apartheid. Its aim is to encourage investors to divest themselves of the 200 most carbon-intensive companies in the world. It is also attempting to get individuals to question their banks about their financing of fossil fuels. Carbon risk has already become a reputational risk for financial institutions.

Divest/Invest and Divest/Engage

While the idea is the same as for Go Fossil Free (divest portfolios of the most carbon-intensive companies), these initiatives urge investors to combine divestment either with green economy investment (Divest/Invest) or with shareholder engagement (Divest/Engage) to compel companies to decrease their emissions.