The world we live in is fundamentally changing. Technological innovation, urbanization, climate change and the transition to clean energy are re-shaping our lives and the planet as we know it.
During the Schroders Global Transformation Seminar several experts took the audience on an in-depth tour of how these themes are forcing the pace of change, presenting significant investment opportunities for those who know how to find them.
From an historical point of view, Schroders has been very quick to embrace climate change as a thematic opportunity for investors.
“Back in 2007, we thought this would represent a massive driver going forward“, points out Yashica Reddy, Associate Product Manager at Schroders.
The climate change process only seems to be accelerating.
A 1°C warming has already been accounted for in the current scenarios, plus another 0,5°C already “baked-in“ from greenhouse gas emissions (GHG) already released.
Climate progress dashboard
Schroders has developed a climate progress dashboard, which measures the progress made on several indicators at the global level.
According to the dashboard, at this point in time, we are heading for 3,8°C increase in temperatures, given the current level of investments in the oil and gas production.
The Paris Agreement set out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C.
Investing in climate change
The main sectors contributing to this evolution are the electricity production from non renewable sources (coal, gas, oil), agriculture, industry and transport.
“Addressing climate change requires a radical reduction in greenhouse gas (GHG) emissions. “We need to look beyond the obvious sources of those emissions,” says Reddy.
“A two degree scenario requires an 80% reduction in GHG emissions per capita by 2050, and those emissions must eventually go to zero.“
But what kind of efforts will be required to limit the impact of climate change?
For some of the sources of emissions, the pathway to decarbonisation is clear.
In the energy sector, renewable energy has come of age and is cheaper than fossil fuels in many geographies. In the passenger vehicle market, electric vehicle technology is fast maturing.
“Although these developments are hugely encouraging, they will not be enough: we need to significantly address all sources of emissions,” says Reddy.
Emissions from food, fashion, retail and air travel are some of the areas which have historically not garnered much attention. That’s either because they were less obvious, or because they seemed so intractable.
Risks and opportunities
Naturally, there are “stranded” assets, unable or unwilling to cope with climate change, but there are also huge opportunities for sustainability leaders.
Schroder ISF1 Global Climate Change Equity focuses on companies in five sectors: clean energy, sustainable transport, energy efficiency, environmental resources and low carbon leader.
As an investor in the theme of global transformation, Schroders looks to capture a whole range of investment opportunities from the climate transition.
Global Transformation at Schroders
For more information on the views of Schroders on the big global transformational topics and our investment approach in this area visit www.schroders.com/globaltransformation
Other related topics:
[1] Schroder ISF stands for Schroder International Selection Fund
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