The Climate Emergency — the positive role investors can play

3 min read 28 Jan 21

Summary: Climate change poses a real and present danger to the well-being of people and the planet.

And while the priority for most investors is ensuring they get a good return on their investments, more and more people are becoming aware that alongside the potential for good returns, they can have an enormous influence on some of the planet’s most pressing challenges through their investments

Targeting returns PLUS helping to heal the planet

The next decade presents a critical window in which we can still shape the trajectory of climate change. It’s crucial that we act on this opportunity now to change course. This not only demands that we change our behaviour, but that we also invest heavily – and urgently – in the transition to a low-carbon economy. 

We believe that where companies can provide solutions to the greatest challenge faced by the planet, they can present some of the most compelling opportunities for long-term investors. And in turn investors can play a part in addressing the climate emergency by taking control of where their money is invested.

At M&G we believe your financial choices have the greatest potential to effect the changes in the world we so urgently need. But there doesn't need to be a trade-off between profits and the planet.

While there are some elements of the climate equation that we can address individually in our daily lives – such as reducing food waste and flying less often – lifestyle choices can only cut emissions so far.

The COVID-19 pandemic brought much of global society to a standstill in 2020. Meanwhile, the dramatic effects of climate change continued unabated, posing their own threat to natural habitats, human populations and the economy.

With the five-year period from 2016 to 2020 predicted to be the warmest in history, your investment choices have never been more important.

Investment opportunities to help tackle the climate crisis

Transformational action can no longer be postponed. By 2050, we must achieve net zero greenhouse gas emissions worldwide.

Meeting this challenge demands deep and far-reaching reductions in emissions across all aspects of the economy. Looking at the primary sources of greenhouse gases, we can see where solutions can have the greatest impact.

Altering the course of climate change demands that we find and embrace alternative energy sources and more efficient ways of producing goods and services. 

Investing in solutions for long-term investors and the planet

With growing recognition of the urgency of the challenge, we believe there are compelling long-term opportunities for companies that are actively accelerating the shift to a low carbon economy.

We perceive three key areas where companies can have a positive impact in the fight against climate change. The first is where activities or innovations directly cut greenhouse gas emissions. 

Alternative energy

Alternative energy is an obvious sector for investment. Replacing carbon-intensive fossil fuels with green electricity, harnessed from the wind and sun, would make the single biggest contribution to meeting global climate goals. Less obvious investment candidates, perhaps, are components and systems that improve energy efficiency, thereby reducing emissions.

Cleaner industry and transportation

The second group of impactful companies are those whose solutions make industry and transportation – which account for 35% of emissions combined – less polluting. This may include companies whose technologies underpin the future of mobility or energy storage.

Reducing waste

Thirdly, companies that contribute to a more circular economy – by designing out waste, keeping materials in use for as long as possible, and regenerating natural systems – can also play a major role in the transition to a resource-efficient, low-carbon economy. 

Seizing the opportunity for profits with purpose

The risks of climate inaction are present and mounting. The cost of extreme weather events is rising: three of the costliest Atlantic hurricanes on record have occurred since 2017.

We need to understand how investments are not only exposed to the risks associated with climate change, but also how they can seize the opportunities it represents. Where companies do not act, they will miss the opportunities for success that lie in tackling this challenge. 

But there does not need to be a trade-off between profits and the planet. Where companies can successfully deliver solutions that mitigate climate change, their shareholders can aspire to achieve competitive financial returns and contribute to a demonstrably positive impact for the planet and its people. 

The views expressed in this document should not be taken as a recommendation, advice or forecast.

The value of the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested. 

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