TRADE & FINANCE
MITIGATING
CLIMATE
CHANGE WITH
LOW CARBON
INVESTMENTS
STOXX Limited
Selnaustrasse 30
CH-8021 Zürich
Switzerland
Phone: +41 58 399 5300
www.stoxx.com
28
Last year’s United Nations Climate
Change Summit in Paris concluded
with the adoption of a momentous
agreement between nearly 200
countries to limit global warming
below 2°C, clearly signaling that the
world is ready to take a step in the right
direction to mitigate climate change.
Though primarily a political signal, the
agreement has increased pressure on
companies along with investors.
One major message of the
climate change conference was
that carbon emissions will no longer
be economically justifiable in any
business model in the future. In recent
years, it has become apparent that
fossil energy has no bright investment
future. Long-term investors in particular
are becoming increasingly aware of the
risks climate change presents to their
assets. Several leading institutional
investors, like the Norwegian Sovereign
Wealth Fund or Allianz Group, have
decided not to invest in businesses
relying on fossil energy.
This decision is forward-looking:
A change towards a more sustainable
investment approach is also demanded
from governmental side. In 2015,
France has introduced mandatory
carbon reporting for portfolios of
pension funds, insurance companies
and other institutional investors.
Other countries want to implement
similar obligations as governments are
pushing hard. Obviously, institutional
investors are expected to reflect the
growing concerns about climate
change in their portfolios.
So far, however, it has not been as easy
to implement sustainable investments.
Pension funds for example are often
obligated to follow a pre-defined
benchmark. As a result, and in order
to avoid undesired tracking errors they
can only rely on indices that embed
low carbon filters. Some investors may
want to get the most out of the leading
sustainable companies only, while others
would consider companies and their
whole supply chain additionally.