Page 30 - DIY Investor Magazine - Issue 28

SOLVING CLIMATE CHANGE CAN BE THE INVESTMENT OPPORTUNITY OF OUR LIFETIME...IF WE FOCUS ON THE COMPANIES THAT BRING TO MARKET THE RELEVANT SOLUTIONS By Gabriela Herculano, CEO of iClima Earth Founder of the iClima Global Decarbonisation Enablers UCITS ETF (CLMA) The Paris Agreement signed by the world’s nations in 2015 to combat climate change aims to keep the increase in the global average temperature to below 2 °C above pre-industrial levels, and 1.5 °C if possible. The Agreement has helped drive an increasing focus globally on assessing climate change risks, the impacts of business operations on the environment and how greenhouse gas (GHG) emissions are disclosed. Several international initiatives, such as the Task Force on Climate Related Financial Disclosure, the United Nation’s Net Zero Alliance and several by the financial industry have all helped accelerate the transition to a low carbon world, rewarding companies that cut emissions while urging them to be more transparent about their impacts on the environment. However, more action and new approaches are needed. Research (1) by the London School of Economics found, for example, that in a sample of companies generating 40% of global emissions, less than one in five (18%) were cutting emissions at the rate necessary to meet the 2°C target. The United Nations (2) estimates the world must cut emissions by 7.6% every year. At present, global emissions are 56 gigatons, which means the world needs a 4.26 gigatons cut over the next year alone. Any delay and the required cut could rise to 15.5% by 2025. NEW METHODS ARE NEEDED TO MEASURE EMISSION CUTS Any shift to a low-carbon world requires new approaches and innovations by companies that help change societal behaviour, and new ways of measuring climate impacts. Unfortunately, many companies don’t adequately disclose their ‘carbon footprints’ and very few attempt to quantify their emissions; without proper measurement it is hard to track progress, which is one of the reasons we focus on CO2e avoidance, the other side of the coin. We want to guide investors to those companies that are enabling the transition to a net zero emissions world. Our “climate champions” are companies that provide real solutions to climate change. They provide product and services that enable other companies to reduce their CO2 emissions (CO2e) and have a significant impact that can be measured in terms of ‘CO2e avoidance’. Investors can help bring about fundamental change by investing in such companies. ‘COMPANIES THAT PROVIDE REAL SOLUTIONS TO CLIMATE’ CHANGE iClima helps investors identify companies actively “doing more good” rather than those just “doing less bad” and provide investment products that focus on companies enabling CO2e avoidance. But how much CO2e avoidance could such solutions deliver? DEFINING ‘AVOIDANCE’ ‘Avoided emissions’ are reductions brought about by products or services that provide the same or similar functions as existing products - but with significantly less GHG emissions. (3) DIY Investor Magazine | Apr 2021 30