For super funds and their advisers

The revenue opportunities in move to zero carbon world

David Sheasby

Companies are increasingly making low-carbon investments, not only to reduce emissions and costs, but also to take advantage of revenue opportunities. When you step back and look at what’s required to reach the targets already set, massive disruption and investment means major business opportunities.

The 189 parties to the Agreement, which took effect in November 2016, have made a reasonable fist of setting out on the journey, on average, but most are well behind the main goal set for 2050. This goal requires a balance in emissions – net zero carbon emissions – such that the global temperature increase will be reduced to below 2.0 degrees at a minimum and to 1.5 degrees as a preferred target.

The Agreement will hit the headlines again very soon, because next month is when the withdrawal of the US, announced in June 2017, is due to take effect, coinciding with country’s presidential election.

While the politicians still do what politicians do, the markets have already made their decision and lots of investors and companies are looking to protect themselves against the risks and take advantage of the opportunities. The risks tend to grab the media attention while opportunities require more insight and analysis, attracting attention after the fact.

According to ‘Climate Change Opportunities’, the latest report from Martin Currie’s ‘Long-Term Investment Institute’, which researches various aspects of the firm’s long-term focus on partnerships with institutional clients, there are several key groups of opportunities, including:

  • Recasting the energy system, where a move towards electrification and increasing reliance on low-carbon energy is going to require significant capital expenditure
  • A focus on efficiency, where many companies have already made considerable progress for cost-reduction purposes, and now have a new prospect in investing in abatement of emissions, such as products to drive automation, more efficient lighting and various new building techniques
  • New products and technologies, where reaching net-zero emissions will require many low-carbon technologies alongside a lot of capital, and
  • Infrastructure, real estate and smart cities – a huge investment will be required to protect existing buildings and infrastructure from the impact of climate change, while ensuring the future infrastructure is resilient to more frequent extreme weather events.

The report was written by David Sheasby. Martin Currie’s head of stewardship and ESG. He says that many companies are looking to build climate resilience into their business strategy, leading the way as they build their understanding of the potential role they can play in the transition to a lower-carbon economy.

Sheasby says: “Climate change presents a broad array of risks but the transition to a lower-carbon economy and the adaptation required to address the physical effects of climate change present many opportunities.

“Some of these will require policy support and initiatives like the Green Deal in Europe will serve to accelerate some of these investment trends. Undoubtedly the companies investing and preparing to become climate resilient will put themselves in a strong position to embrace the inevitable changes that are to come.”

– G.B.

Note: Martin Currie is a sponsor of Investor Strategy News. The views expressed are those of the author and not necessarily those of Martin Currie.

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