ESG Club
CLIMATE CHANGE - SOME WELCOME PROGRESS, MORE TO DO
The results of the COP26 climate change conference fall into the glass half full, glass half empty category. The onus now is on greater efforts to adapt to higher global temperatures as work on mitigating the temperature rise continues, says Alex Bernhardt, global head of sustainability research at BNP Paribas Asset Management.
Its more than likely that we will have to accept that a rise in global temperatures by 1.5oC above pre-industrial levels by 2040 is baked in no matter what emis- sions reduction scenario we look at. A greater focus should now be on adapt- ing to that increase – in developed econo- mies, which historically are the largest CO₂ emitters, and developing countries such as India and China, which will be the large emitters of the future as their economies grow.
While COP26 resulted in a number of welcome announcements and initiatives, the reality is that countries’ current ambi- tions in mitigating climate change will not allow us to prevent the 1.5oC maxi- mum rise in global temperatures of the 2015 Paris Agreement.
That leaves a lot more to be done and that includes a shift to adaptation and spending on efforts to prepare for the consequences of higher temperatures on work & liveli- hoods and wellbeing & health – in fact, on life in general. 1.5oC higher temperatures will have a significant impact: for example, a one in 10 year extreme heat event is now going to become a four in 10 year event.
As a reminder, physical climate risks come in two forms: – Chronic – steadily rising temperatures will increasingly impact the productivity of the land and the people that depend on it for their livelihoods; changing rainfall regimes will result in water stress in more regions; and sea- level rise will impact coastal real estate, industry and, more fundamentally, habitability in low-lying areas.
– Acute – this means there is an in- creased likelihood of heat extremes; then there are wildfires, droughts and extreme storms – their frequency and intensity are projected to shift to vary- ing degrees in a warming world.
Adaptation will cover, for example, infra- structure and buildings – our lived envi- ronments – and we welcome the com- mitment in the Glasgow negotiations to double adaptation financing specifically for developing countries from 2019 lev- els by 2025, although I should note that we need to spend more on mitigation and adaption.
Adapt or…
There is a clear call to action here for pri- vate investors to move money flows towards climate solutions such as greater energy and water efficiency, the large- scale use of clean hydrogen, precision irrigation, and carbon capture and other net zero technologies. The cost of climate adaptation is estimated to reach up to $300bn (£220bn) a year in 2030, compared to the $30bn (£22bn) invested in 2017-2018. Just 1.6% of this is coming from private sources.¹ Private investors will also have to engage with portfolio companies more aggres-
PI Partnership – BNP Paribas Asset Management
There is a clear call to action here for private investors to move money flows towards climate solutions such as greater energy and water efficiency, the large-scale use of clean hydrogen, precision irrigation, and carbon capture and other net zero technologies. Alex Bernhardt,
BNP Paribas Asset Management
sively to get them to adopt net zero strate- gies and work alongside the public sector more effectively. We believe it is time for the world to start thinking about more climate resilience. Trillions of dollars will need to be mobi- lised in meeting the Sustainable Develop- ment Goals, adapting to climate change and mitigating climate change in line with the goals of the Paris Agreement.
1) Source: How to finance climate change resilience by Alex Bernhardt and Thibaud Clisson. September
For professional investors. BNP PARIBAS ASSET MANAGEMENT UK Limited, “the investment company”, is authorised and regulated by the Financial Conduct Authority. Registered in England No: 02474627, registered office: 5 Aldermanbury Square, London, England, EC2V 7BP, United Kingdom. This article has been prepared by the company. This article is produced for information purposes only and does not constitute: 1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. Opinions included in this material constitute the judgment of the investment company at the time specified and may be subject to change without notice. The investment company is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor’s investment portfolio. Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the financial instruments may have a significant effect on the results portrayed in this material. This article is directed only at person(s) who have professional experience in matters relating to investments (“relevant persons”). Any investment or investment activity to which this document relates is available only to and will be engaged in only with Professional Clients as defined in the rules of the Financial Conduct Authority. Any person who is not a relevant person should not act or rely on this article or any of its contents. All information referred to in the article is available on
www.bnpparibas-am.com. As at January 2022.
32 | portfolio institutional | February 2022 | issue 110
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