What investors can do to tackle climate change

The sixth report from the Intergovernmental Panel on Climate Change (IPCC) this month made sombre reading, with the UN Secretary-General saying he viewed the report as a “code red for humanity”.

The report outlines that, since 1970, global surface temperatures have risen faster than in any other 50-year period over the past 2,000 years. What’s more, each of the last four decades has been successively warmer than any decade that preceded it since 1950. 

Evidence of global warming is all around us. Only yesterday (11 August 2021) - subject to verification by the World Meteorological Organisation - Italy experienced Europe’s hottest ever day, with a temperature of 48.8°C recorded in Sicily.

And the high temperature reading comes at the same time as wildfires are raging in Greece and just a month after severe flooding in Germany and Belgium.

According to the IPCC, temperatures will continue to increase until at least the mid-century under all emissions scenarios considered. It is “more likely than not” that the world will reach 1.5°C sometime over the next 20 years - bringing forward the last estimate by a decade. 

Should temperatures rise any higher and reach 2°C, the world will become a profoundly different place, with some parts of the world becoming uninhabitable. 

Working together to combat climate change

So, what can be done? As Randeep Somel, fund manager at M&G put it “this report should hopefully be a stark reminder to all the leaseholders of our planet, be they consumers, industry or governments, that action needs to be taken sooner, and that we all have our part to play.”

The UK government is already taking some action and has a target for net zero emissions by 2050. Britain was also the first major industrialised country in the world to sign this into law in 2019. The aim is to work towards a 68% reduction by 2030 and 78% reductions by 2035, by way of initiatives such as a ban on new petrol and diesel car sales by 2030 and new gas boilers by 2035.

And individuals can also do their part by doing things like swapping to electric vehicles, increasing levels of recycling and consuming less.

Investing in the companies helping us reach net zero is another way of doing our bit.

How investors can play their part

Ninety One Global Environment fund is an obvious choice in this area as it only invests in companies that are contributing to the decarbonisation of the world economy. As well as avoiding creating carbon emissions, companies will also have to have at least 50% of their revenues from three sectors: renewable energy; efficient use of resources, and electrification. This fund is on the Chelsea Core Selection.

Newly launched Artemis Positive Future is another option. The four-strong team is looking for those firms making a material positive impact on the world through either environmental or social improvements. These companies will sit at the axis of technological and sustainable change, looking to disrupt old economies to capture market share.

Then there is LF Montanaro Better World, which invests in businesses whose products or services are making a positive impact on the world. To identify these firms, the team has six impact ‘themes’: environmental protection, the green economy, healthcare, innovative technologies, nutrition and well-being.

BMO Responsible Global Equity is a slightly different option as it also invests in companies where there are problems to be resolved. It screens out alcohol, gambling, pornography, weapons and tobacco firms, and the fund is fossil fuel free. There are also restrictions on environmental impact, animal welfare, human rights and labour standards.

A final option is Rathbone Greenbank Global Sustainability is a high conviction global equity fund that will actively avoid businesses involved in unethical or unsustainable practices. The exclusion criteria include amongst others, of fossil fuels, nuclear power and environment and/or human rights practices. Each holding will also have to have at least one positive environmental, social or governance attribute.

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and individual managers and do not constitute financial advice.