PERSPECTIVE3-5 min to read

The world is on fire: how can investors move from climate anxiety to action?

It’s been billed as humanity's last chance to save the planet. Even if you’re wary of hyperbole, it’s hard to deny that COP26 marks an important moment.

02/11/2021
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Authors

Kate Rogers
Head of Sustainability, Wealth

Nearly 60% of young people are “very” or “extremely” worried about climate change, according to research from The University of Bath in the UK.

But climate anxiety is not limited to the young. People across the generations want to see an urgent response from world leaders.

The scale of the problem can bring on a sense of doom and helplessness. How can my individual actions make a difference? Does it really matter if I eat less meat or fly less?

But of course, in a climate emergency, every action counts: every molecule of carbon that stays in the ground helps our future.

Like it or not, in our capitalist economic system money makes the world go round. What you do with your money does matter. And switching to sustainable pensions, investments and savings could be 23 times more impactful than lifestyle changes, the Make My Money Matter campaign estimates.

When it comes to investing, shareholders have the power to effect significant change.

Every atom of carbon that stays in the ground helps our future

The shake-up of ExxonMobil’s board this summer is a good example. Shareholder resolutions tabled by activist investors proposed four new board members. The oil giant lost three seats. This is because asset managers like Schroders supported the proposals and voted for change. 

Climate action by investors can drive both financial returns and help to protect the planet. Avoiding carbon-intensive industries also reduces risk.

In the near term, COP26 developments could have direct implications for investors.

Carbon taxes put a price on carbon and emitters are charged based on what they release. This is necessary, and would be positive in the fight against climate change.  

Of course, shares in companies that are the largest emitters, or those that are the most exposed to carbon in their operations, are likely to fare the worst if action on carbon pricing is taken.

When Schroders launched its Carbon Value at Risk tool* it showed 20% of profits generated by global companies were at risk if carbon prices should rise to $100/tonne, the level required to meet the 2015 Paris Agreement.

Climate conscious investors have already prepared for this – we know that all profits are not equal and that environmental impacts, like carbon emissions, are likely to be a drag on profits in the future.  

While investors can improve returns by avoiding risk, there are of course enormous potential gains to be made through investments harnessing new cleaner technologies. Innovation provides real hope in the fight against climate change.

So COP26 gives us an opportunity, a moment in time on which I hope we will look back and say that coordinated action was taken.

This article first appeared in The i Paper on 29 October

*Schroders’ Carbon Value at Risk model estimates the way companies make money and how their profits would change if carbon prices rose significantly. Schroders Carbon Value at Risk model was launched in 2017.

Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.

 

Authors

Kate Rogers
Head of Sustainability, Wealth

Topics

Cazenove Capital is a trading name of Schroders (C.I.) Ltd which is licensed under the Banking Supervision (Bailiwick of Guernsey) Law 2020 and the Protection of Investors (Bailiwick of Guernsey) Law 2020, as amended in the conduct of banking and investment business. Registered address at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1 3UF, (No.24546) . Schroders (C.I.) Limited, Jersey Branch is regulated by the Jersey Financial Services Commission in the conduct of investment business. Registered address at IFC1, Esplanade, St Helier, Jersey, JE2 3BX, (No.31076).

The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.