Reconciling investment and the fight against climate change

When we talk about climate, we obviously think about global warming. We now know from scientific sources that human activity is having an effect on the increase in greenhouse gas emissions, causing, among other things, a rise in the earth's surface temperature. The Paris agreements of 2015 set an ambition to limit the increase in temperature to 2°C, or even to move towards the objective of 1.5% compared to the pre-industrial era by 2100. What does this mean and how can I, as an investor, be an actor of change?

Let's go over a few things...

Co2 emissions are largely induced by the combustion of coal, oil and gas (fossil fuels), but also by deforestation and the production of cement or other industrial processes. When these sources are broken down by sector of activity, the breakdown is as follows (from the last reporting by the IPCC - Intergovernmental Panel on Climate Change):

Global greenhouse gas emissions by economic sector, 2010 - 50Gt CO2eq - Sources: IPCC (2014)

Let's move on to investments..

It is important to be aware that investing in a portfolio means investing - according to one's objectives and risk profile - in a set of emitters that have activities that have an impact on global warming. Let's be clear: any portfolio, any index, therefore has a contribution to global warming.

If one wants to contribute to the fight against global warming through one's investment choices, in addition to thinking about asset allocation according to one's objective and risk profile, one can ask oneself how the economic agents that one proposes to finance commit themselves to the climate.

There are several possible choices...

If one wishes to take advantage of the opportunities emerging in this sector of ecological transition and specifically support these sectors, one can favour investment solutions that follow this theme. Depending on your objectives and risk profile, you may, for example, choose equity funds with an environmental theme or bond funds specialising in green bonds(1).
If one prefers not to reduce one's investment thesis to a few sectors, but to remain well diversified across all sectors, one can look at SRI (Socially Responsible Investment) solutions whose sustainable objective will be the reduction of greenhouse gases. All major companies are now required to publish their carbon data. Some even commit themselves to reduce them significantly. Thus, with these data, the fund manager is able to monitor aggregate emissions at the level of the investment portfolio.
If you are able to absorb a capital loss on your investments, you can also invest in the non-listed sector in companies developing renewable energies, for example, or climate-related private equity funds.

Société Générale Private Banking is able to assist you with all its solutions, so don't hesitate to talk to your banker.

Société générale Private Banking est en mesure de vous accompagner sur toutes ses solutions n’hésitez pas à en parler à votre banquier.

(1) Green bonds: A green bond is a bond issue that a company, international organisation or local authority launches on the financial markets to finance a project or activity with environmental benefits. Green bonds have been particularly popular since 2013 in France and around the world.

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