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Time’s up for investment industry in race to save the world


City insiders have issued a final warning to investors and fund managers in the wake of the latest devastating climate change report.

The investment industry “must act aggressively, fast and in collaboration” in the few months remaining until the Cop26 United Nations (UN) summit – considered one of the final opportunities to do so.

The call-to-arms follows this week’s report from the UN’s Intergovernmental Panel on Climate Change (IPCC) – which confirms the “code red for humanity”. It states that only an immediate and extreme cut to carbon emissions across the world’s societies can now prevent the most catastrophic impacts of man-made climate change.

Even with such action, designed to cap global warming at 1.5 degrees above pre-industrial levels, historical inaction and political game playing mean some effects, including significant sea level rises and more frequent extreme weather events are now locked in.

“The UN’s landmark climate change report has revealed the devastating reality we are likely to face within just 20 years,” said Gemma Woodward, director of responsible investment for investment manager Quilter Cheviot.

“Even in a best-case scenario of deep cuts in greenhouse gas emissions, the world is likely to temporarily reach 1.5C of warming and continue to battle extreme weather events.

“The new report suggests that even with ambitious interventions such as Boris Johnson’s 10-point plan to launch a green industrial revolution in the UK, temperatures are likely to continue to rise until ‘at least’ 2050.

“New evidence suggests that if we bring emissions to net zero and keep them there, warming will stabilise. This data must kick-start a new era where climate considerations trump all else.

“This latest data should act as a stark reminder of why investors must look to the future and consider sectors such as renewable energy infrastructure to support the global ambition.”

Gabriela Herculano, co-founder of the iClima Global Decarbonisation Enablers UCITS ETF said: “The IPCC report is yet another clear warning that we are running out of time and must act fast, aggressively and in collaboration. The next few months ahead of Cop26 are critical and give us an opportunity to focus on the key points that must be agreed on promptly. Firstly, we need a clear ban on new coal power plants.

“As Carbon Tracker pointed out last month, China, India, Indonesia, Japan and Vietnam are still planning to build 600 new coal fired power plants. Renewable energy can be more price competitive in those jurisdictions so alternatives are in place. Moreover, we do need a global agreement on a deadline to decommission all existing coal plants.”

At the same time, ethical funds with strong environmental, social and governance (ESG) mandates continue to outperform non-ethical options as the appetite for sustainable business grows while penalties and reforms hinder those that are failing to evolve.

Recent data from comparison site Moneyfacts.co.uk showed ethical funds overall returned 19.9 per cent in the year to the beginning of July, compared with 17.9 per cent for non-ethical funds.

Out of 23 comparable sectors that include ethical funds, 13 sectors produced a greater ethical fund average performance when compared with non-ethical funds, based on the past year’s data.

Moneyfacts pointed to a number of external studies, including from the Department of Business, Energy and Industrial Strategy, that show consumers are building their investor confidence and are keen to invest more ethically, with many undergoing a behavioural shift when it comes to tackling climate change.

“The assumption that choosing an ethical fund can mean a sacrifice in return versus non-ethical is untrue and has been so for many years,” warned Rachel Springall of Moneyfacts.

“Ethical funds have outperformed non-ethical in 13 out of 23 sectors based on the latest one-year performance figures.”

Joshua Hewitt, chartered financial planner at independent financial adviser Kellands, added: “Although clients may not initiate the conversation around sustainable investing, we find that the vast majority are open to consider the options available to them.

“Clients who may not have deep rooted conviction to invest in a sustainable manner are more and more willing to consider their opportunities.”

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