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#COP21 #ParisAgreement: AXA IM Comments On Impact In Investors

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Luisa Florez, Head of Qualitative ESG Research at AXA Investment Managers (AXA IM) and Laurence Devivier, Senior RI Economist at the company, comment on the implications for investors of the recent COP21 agreement.

Why COP21 was a success:

An agreement to a Climate Change ‘Paris Accord’ that includes the largest contributors to greenhouse gas emissions (China and the USA), clearly reflects a worldwide awareness of the long-term risk of climate change on the environment and our economies.

· We think it is reasonable to expect that the agreement will be ratified on 22 April 2016 because a large consensus on the subject has emerged, notably with China who are responsible for 27% of total emissions.

This agreement is a binding obligation, meaning that individual countries must set an emissions reduction target to be reviewed every 5 years. While there are no sanctions when targets are not reached, there are two major forces related to the binding obligation: the transparency and the upward revision every 5 years of the National Determined Contribution (NDC) targets. The latter point should put pressure on countries to implement a low carbon transition, even in the absence of sanctions.

Given that current policies place the world on a path towards +3.6°C warming above pre-industrial levels, the common objective to keep global warming below 2°C by the end of the century (plus a more ambitious target “to limit the temperature increase to 1.5°C (1)”) means that NDCs have to be upgraded as soon as possible to match objectives with reality.

The agreement has reaffirmed the goal for USD 100 billion per year by 2020 to be mobilised and appropriated for developing countries to encourage emission reductions and adaptation to the physical consequences of climate change, in particular in the less developed economies and island countries. There are numerous companies, sectors and asset classes that will benefit from this investment.

Impact on investors:

While the focus of 2015 was on carbon divestment, it is our expectation that from 2016 onwards, the perspective will change and investors will be looking at the emerging investment opportunities and governance implications. In our view, the following three themes will influence investment decisions:

1. The evolution of carbon-intensive sectors. The agreement sends a clear message to companies operating in the power generation, energy, transport, buildings and industrial sectors that change is required. We do not expect this to have immediate impact on pricing or asset allocation and rather see this as an issue that analysts and investors will incorporate into their research and fundamental analysis to assess how companies choose to respond to the evolving landscape.

2. Identifying opportunities to finance the transition to a low carbon economy. Public and private investors will be a key source of capital for investment in new technologies that support energy efficiency or that provide new sources of energy. Working off an assumption that the population will continue to consume the same level of energy, investment will be directed at either reducing the carbon intensity of current sources of energy, or replacing this demand with new sources. The opportunity is widespread and will impact many different sectors, regions and asset classes. For example, renewables such as wind will require infrastructure investment along with innovative solutions for storage and transport. While in the past some of these opportunities were supported by government subsidies, this agreement has made the support more explicit and will need to rely on capital from all investor segments in order to implement this transition at the target pace.

3. Greater engagement and higher governance standards. The financial stability board (FSB), which was established following the global financial crisis to monitor and assess vulnerabilities affecting the global financial system, will be pushing companies to disclose their climate-related risks. This policy will increase transparency for investors, which in turn will support fundamental analysis and make ESG analysis and scoring more robust. While the momentum for this kind of disclosure had been established before COP21 through active engagement by the investment community, this decision by the FSB makes these measures more concrete. Interestingly, the French government introduced new and unique regulation requiring institutional investors to align their investment decisions with the 2°C scenario. While only general guidelines were provided, it is expected that over the next two years, best practice will emerge and will shape the way reporting will evolve in the future. While France was the only country to make the direct link with investors, institutional investors in other countries will certainly be keeping a close eye on the reporting, governance and investment implications of this regulation.

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Green Weddings Trend: Why 70% of Newlyweds Are Going Green

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A couple of months ago, my best friend got married to her new husband. They are both very eco-conscious people, so they decided to have a unique twist on their wedding. They asked for the following:

  • They arranged a carpool with their friends.
  • They didn’t have any balloons. Instead they used umbrellas.
  • They used plant materials instead of plastic confetti.
  • My friend insisted her husband not purchase a diamond. In addition to being ecologically conscious, she didn’t like the idea of having a stone that was used in conflict zones.

My friends aren’t the only ones making these changes. In fact, nearly a quarter of all newlyweds are organizing green weddings.

Green Weddings Are Becoming the Norm

People are more concerned about green living than ever before. They are trying to incorporate environmental protectionist ideas into every facet of their lives, even the most intimate, such as marriage. A growing number of people are trying to have green weddings, which can make a big difference in reducing their carbon footprint.

How much of a difference can this make? Here are some statistics to bear in mind:

There are a number ofreasons that green weddings are becoming more important. Here are a few.

People Are More Worried About Environmental Preservation than Ever Before

Green living in general is becoming a greater concern for most people. Even younger conservatives are breaking from their older counterparts by insisting on fighting climate change. According to a poll from Pew Research earlier this year, 75% of Americans say that they are very concerned about protecting the environment. Having green weddings is a good way to act on this concern.

One of the biggest changes people are making is using recycled products for their green weddings. This is explained by the research from Pew:

“Overall, 32% of U.S. adults say they are bothered a lot by people throwing away things that could be recycled. Roughly six-in-ten Americans (61%) who say they always try to live in ways that protect the environment say it bothers them “a lot” when others throw away things that could be recycled. Among those who are less focused on environmental protection, only a quarter say it bothers them a lot when others don’t recycle. People who are environmentally conscious are also twice as likely as others to say that seeing someone incorrectly putting trash in recycling bins bothers them a lot (42% vs. 21%).”

Indifferent Politicians Are Driving them to Take More Initiative

Many politicians in power have been very hesitant to take action on climate change. Many of them have openly stated that it is a hoax. These politicians are forcing people to do what they can in their own lives to make a difference. Making small changes, such as hosting green weddings, is a great way to improve the environment without waiting for political momentum.

Cost and Simplicity

A couple of the biggest reasons that people want to host green weddings have nothing to do with their concern for the environment. Running green weddings is simply cheaper and simpler than having a massive, traditional one. One of the biggest changes is that they are buying green engagement rings from the best brands.

Green Weddings Are the Future

Green weddings have become very popular over the past few years. They will probably account for close to 90% of all marriages by 2025. People that are planning to get married should look into the benefits and plan accordingly.

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Green Tech Start-Ups: Are they the Future?

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Endless innovations are occurring in green companies, reinventing the industries they belong to. Gradually, they are beginning to amass more success and popularity. Consequently, these factors serve as a good indicator for green technology businesses, and their development must begin somewhere.

Green tech start-ups boast a wide array of opportunities for the economy and environment, while boosting recruitment openings with valuable services. While the technology industry is littered with high revenues and competition, the green tech start-ups are the clear sign of a cleaner future.

Fulfilling a Genuine Need

Many tech companies will market themselves as the ultimate tech giants to shift stock and make profit. As they all vie for attention through warped corporate rhetoric, there is only one ethical winner; the start-up green tech company.

Some argue that mainstream tech businesses have grown far too big, branching out into other industries and standing between the consumer and practically everything they do. However, green tech start-ups go beyond the shallow ambitions of a company, answering a call to sincerely help the customer and climate in any way they can. Of course, this is an attractive business model, putting customers at ease as they contribute to a humanitarian cause that is genuine through and through.

After all, empathy is a striking trait to have in business, and green tech start-ups maintain this composure by their very nature and purpose.

Creating Opportunities

Despite the pursuits for clean energy still needing more awareness, green tech is an area that is ripe for contribution and expansion. There’s no need to copy another company or be a business of cheap knockoffs; green tech start-ups can add a new voice to the economy by being fresh, fearless and entrepreneurial.

Technology is at its most useful when it breaks new ground, an awe that eco-friendly innovations have by default in their operations. Of course, green tech start-ups have the chance to build on this foundation and create harmony instead of climate crisis. Ultimately, the tech advancements are what revolutionise clean energy as more than an activist niche, putting theory into practice.

Despite the US gradually becoming more disengaged with green technology, others such as China and Canada recognise the potential in green technology for creating jobs and growth in their respective economies. The slack of others spurs them on, which creates a constant influx of prospects for the green tech sector. Put simply, their services are always required, able to thrive from country to country.

A Fundamental Foresight

Mainstream technology can seem repetitive and dull, tinkering with what has come before rather than turning tech on its head. Since 2011, technology has been accused of stagnation, something which the internet and petty app services seem to disguise in short reaching ideas of creativity.

However, green tech start-ups aren’t just winging it, and operate with a roadmap of climate change in the years ahead to strategize accordingly. In other words, they aren’t simply looking to make a quick profit by sticking to a trend, but have the long-term future in mind. Consequently, the green tech start-up will be there from the very start, building up from the foundational level to only grow as more and more people inevitably go green.

They can additionally forecast their finances too, with the ability to access online platforms despite the differing levels of experience, keeping them in the loop. Consequently, with an eye for the future, green tech startups are the ones who will eventually usher in the new era.

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