The race to net zero

The climate change transition offers opportunities for investors through companies providing solutions to other businesses in this space, helping the economy to reduce climate related risks. These include energy, agricultural, industrial and building solutions. Investing in higher-carbon emitters should not be ruled out, as excluding such stocks is counterproductive for achieving future zero-carbon emission gains, argues Alliance Trust.

Engagement first

Alliance Trust is committed to net-zero greenhouse gas emissions by 2050 and to halving them by 2030, but feels it is wrong to punish industries or countries that are facing the biggest hurdles in moving to a low-carbon world. Mark Atkinson, head of marketing and investor relations at Alliance Trust, says: “Starving such companies of funding at a time when they need it most may be more harmful to a successful shift to a low-carbon economy.

“Avoiding investing in certain industries and companies entirely or selling out of existing investments in firms whose activities harm the climate are both options.

“But this may not bring us closer to a more resilient economy, or benefit wider society, so we use those options sparingly.  Although their carbon footprint might be significant, we believe many of these companies are also part of the solution, not only because they have plans to align their carbon reduction trajectory with the Paris Agreement, but also through researching and investing in alternative energy sources and carbon capture technology.”

A case for exclusion for Alliance Trust are firms making a significant amount from activities likely to be phased out in the net-zero world. “Our sense of what business activities we must exclude will evolve,” says Atkinson, “but we prefer engagement. Having candid but productive discussions with companies is likely to be more effective in decarbonising the global economy.”

Think positive

Positive solution stocks include Bureau Veritas, Schneider Electric, Kubota Corporation and Andritz.

Bureau Veritas is a global leader in the provision of carbon and energy consultancy, verification, and certification services. Its team of experts supports the development of bespoke energy and carbon management strategies to set objectives, targets and management plans.

Schneider Electric is a French multinational providing energy and automation digital solutions for efficiency and sustainability. It addresses homes, buildings, data centres, infrastructure and industries by combining energy technologies, real-time automation, software and services. It was ranked the world’s most sustainable corporation by Corporate Knights in 2021.

Kubota Corporation is a Japanese multinational focused on the manufacturing of a wide range of products and technologies to provide solutions in the areas of food, water and the environment. This includes agricultural machinery, construction equipment, engines, pumps and equipment for water purification, sewage treatment and air conditioning. The company offers smart agriculture products to enhance crop yield as well as water solutions.

Finally, Andritz is an international technology group providing plants, systems, equipment and services for various industries. Andritz Hydro is a global supplier of electromechanical systems and services for hydropower plants and one of the leaders in the world market for hydraulic power generation.

Fossil-fuel based investments include BP in the UK, Exxon Mobil in the US aand Petroleo Brasileiros in Brazil.

See also: Green investment solutions for global issues

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