The climate also affects your investments
#SRI — 04.05.2022

The climate also affects your investments

By Ramon Esteruelas - Senior Investment Specialist, BNP Paribas AM

Climate change is the greatest challenge of all times. For investors, it is a double-edged sword, with risks to avoid and opportunities to seize.

Summary

  • Climate change is an important theme for investors
  • It creates additional risks and costs for companies
  • How can they be integrated into an investment strategy?
  • Climate change also offers investment opportunities
  • Which sectors benefit most?

CO2 emissions have doubled since 1970. As a result, the global temperature has risen by 1°C and we are experiencing extreme weather conditions with more frequent heatwaves, heavier rainfall and more droughts. The Intergovernmental Panel on Climate Change (IPCC) predicts that the temperature will rise further between 2030 and 2052 to reach a global warming of more than 1.5°C. To stop climate change, we must drastically reduce greenhouse gas emissions and protect natural resources. Time is running out, but the situation is not desperate. Solutions do exist and are rapidly on the rise. Since 2000, wind and solar power generation has soared, reaching a combined capacity of more than 1,000 GWh.

Objectifs de développement durable

" If global warming exceeds the critical threshold of 2°C, the consequences for companies will be enormous."

Climate risks for investors

Many investors do not realise that climate change not only threatens humanity and nature, but also poses risks to their portfolios. If global warming exceeds the critical threshold of 2°C, the consequences for companies will be enormous.  Stricter regulation, higher costs, physical damage and changing consumer preferences are threatening many sectors, such as agriculture, transport, real estate, energy and insurance.

Investors who do not anticipate this phenomenon in time will feel the effects in their portfolio over the coming years. To avoid the repercussions of climate change, we identify the risks and adapt our investment strategy accordingly. Renewable energy is the growth sector par excellence.

  

But also investment opportunities

Climate change also offers investment opportunities. All over the world, there is a budding number of pioneers who develop innovative solutions in many areas: renewable energies, energy efficiency, water technologies, sustainable food, agriculture, waste treatment, recycling, the circular economy and so on. Renewable energy is the sector of growth par excellence. Germany is following in the footsteps of the US and Great Britain, by accelerating its efforts in the energy transition. The country is targeting 100% of renewable energy in less than 15 years. This theme is attracting more and more investors. At BNP Paribas Asset Management, we are currently investing in residential solar power in the US and in solutions based on hydrogen and advanced materials.

"Renewable energy is the growth sector par excellence."

Ramon Esteruelas - Senior Investment Specialist, BNP Paribas AM

The opinions given on this website are those of the authors and do not necessarily represent the position of BNP Paribas Wealth Management.  

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