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.
How to be More eco-Responsible in 2018
Nowadays, more and more people are talking about being more eco-responsible. There is a constant growth of information regarding the importance of being aware of ecological issues and the methods of using eco-friendly necessities on daily basis.
Have you been considering becoming more eco-responsible after the New Year? If so, here are some useful tips that could help you make the difference in the following year:
1. Energy – produce it, save it
If you’re building a house or planning to expand your living space, think before deciding on the final square footage. Maybe you don’t really need that much space. Unnecessary square footage will force you to spend more building materials, but it will also result in having to use extra heating, air-conditioning, and electricity in it.
It’s even better if you seek professional help to reduce energy consumption. An energy audit can provide you some great piece of advice on how to save on your energy bills.
While buying appliances such as a refrigerator or a dishwasher, make sure they have “Energy Star” label on, as it means they are energy-efficient.
Regarding the production of energy, you can power your home with renewable energy. The most common way is to install rooftop solar panels. They can be used for producing electricity, as well as heat for the house. If powering the whole home is a big step for you, try with solar oven then – they trap the sunlight in order to heat food! Solar air conditioning is another interesting thing to try out – instead of providing you with heat, it cools your house!
2. Don’t be just another tourist
Think about the environment, as well your own enjoyment – try not to travel too far, as most forms of transport contribute to the climate change. Choose the most environmentally friendly means of transport that you can, as well as environmentally friendly accommodation. If you can go to a destination that is being recommended as an eco-travel destination – even better! Interesting countries such as Zambia, Vietnam or Nicaragua are among these destinations that are famous for its sustainability efforts.
3. Let your beauty be also eco-friendly
We all want to look beautiful. Unfortunately, sometimes (or very often) it comes with a price. Cruelty-free cosmetics are making its way on the world market but be careful with the labels – just because it says a product hasn’t been tested on animals, it doesn’t mean that some of the product’s ingredients haven’t been tested on some poor animal.
To be sure which companies definitely stay away from the cruel testing on animals, check PETA Bunny list of cosmetic companies just to make sure which ones are truly and completely cruelty-free.
It’s also important if a brand uses toxic ingredients. Brands such as Tata Harper Skincare or Dr Bronner’s use only organic ingredients and biodegradable packaging, as well as being cruelty-free. Of course, this list is longer, so you’ll have to do some online research.
4. Know thy recycling
People often make mistakes while wanting to do something good for the environment. For example, plastic grocery bags, take-out containers, paper coffee cups and shredded paper cannot be recycled in your curb for many reasons, so don’t throw them into recycling bins. The same applies to pizza boxes, household glass, ceramics, and pottery – whether they are contaminated by grease or difficult to recycle, they just can’t go through the usual recycling process.
People usually forget to do is to rinse plastic and metal containers – they always have some residue, so be thorough. Also, bottle caps are allowed, too, so don’t separate them from the bottles. However, yard waste isn’t recyclable, so any yard waste or junk you are unsure of – just contact rubbish removal services instead of piling it up in public containers or in your own yard.
5. Fashion can be both eco-friendly and cool
Believe it or not, there are actually places where you can buy clothes that are eco-friendly, sustainable, as well as ethical. And they look cool, too! Companies like Everlane are very transparent about where their clothes are manufactured and how the price is set. PACT is another great company that uses non-GMO, organic cotton and non-toxic dyes for their clothing, while simultaneously using renewable energy factories. Soko is a company that uses natural and recycled materials in making their clothes and jewelry.
All in all
The truth is – being eco-responsible can be done in many ways. There are tons of small things we could change when it comes to our habits that would make a positive influence on the environment. The point is to start doing research on things that can be done by every person and it can start with the only thing that person has the control of – their own household.
Top 5 Changes You can Make in Your Life to Reduce Your Carbon Footprint
In a world, where war rages and global warming threatens our very existence, the inhabitants of earth need to be extra vigilant in their efforts to go green. This includes reducing your carbon footprint on the earth and leading a more sustainable life.
Many homeowners feel perplexed by all of the options available to reduce their carbon footprint. They may even feel (falsely) that making their household more green will fail to make that much of a difference in the fight to save our planet.
Even a single home going green has a massive impact on the environment. We can win this battle on home at a time. If you’re interested in accepting the challenge of making your household a green home, read on below for a few of the top changes you can make in your life to reduce your carbon footprint. We all stand to benefit from making the earth safer for future generations – and your wallet won’t complain when you start to see the savings in annual energy costs.
Switch From Dirty Energy to Clean Solar
The ION Solar reviews tell it all–solar is the best way to go. Whether your goal is to slash your energy bills, or to reduce your carbon footprint, the sun is a fantastic source of renewable energy.
It’s important to get past the hype from solar installers. Instead, listen to the plethora of impartial customer reviews that mention everything from a $20 energy bill, to the incredible feeling of knowing that you are doing your part by going green and minimizing harmful emissions in to our atmosphere.
The average investment is $15,000 to $30,000 for installation and purchase of solar panels. Optional battery power packs can help provide consistent power during both night and day. And many government agencies provide federal, state or local grants to help offset upfront investments in clean energy.
Depending on which installed you choose, your household may qualify for low-interest or zero interest loans to cover the up-front cost of your installation. And the loan payments are usually less than your current monthly power bill.
It really is a win-win, as home buyers are looking for homes that feature this technology – meaning solar power installation improves the resale value of your property.
And there are a number of additional home modifications that can help improve the energy efficiency of your home. A programmable thermostat can better manage energy consumption from home cooling and heating systems while you’re away from home. And weather stripping your doors can help keep cool air in during the summer, and warm air in during the winter.
Of course, energy conservation starts at home. And this includes setting a powerful example for your kids. Teach your children how to close windows, strategically keep doors open or closed based on airflow, and encourage them to leave the thermostat alone – opting for adding or removing layers of clothing instead.
Unplug Appliances and Shut Off Electronics
Unplugging your appliances when they aren’t in use, such as the toaster and the coffee maker, has more of an impact than you might think. Set your TVs and stereos on sleep timers, instead of letting them run around the clock. The cumulative impact of wasteful electronic device usage is horrible for our environment – putting unnecessary strain on our electrical grid.
One of the simplest and easiest ways to reduce your carbon footprint is by recycling. You are already throwing this stuff away anyway, right? It doesn’t take much more effort to just put recyclables in a separate container to be recycled, now does it?
Oh, and did I mention that you can earn money for recycling? Yes! Many cities and towns have recycling centers that will purchase your clean plastic and glass bottles for reuse.
Minimize Your Water Usage
Water is one of the easiest things to forget about when it comes to reducing your carbon footprint. Preserve water by turning off the faucet while brushing your teeth. Shorten your shower by a few minutes and turn down the heat on that water heater. You’ll be surprised at how much lower your water bill and your energy bill will be.
Saving money and reducing your carbon footprint? What isn’t to love?
These are just a few of the top ways that you can reduce your carbon footprint and start living a greener lifestyle. And we aren’t factoring in all of the advantages that we’ll reap from public investments in a smarter energy grid.
From decreasing your water usage, to switching to solar for your home’s energy needs, you will feel good at the end of the day knowing you are doing your part to save the future of this planet for generations to come!
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