Investors sense opportunities as more big businesses join the fight against climate-change.
There’s a growing consensus within global business culture that favours tackling and solving problems over that of disinterest and inaction. Maybe it’s the realization that setting new standards and leading by example can far exceed the prospects of any company that simply rests on its laurels and carries on with business as usual. A failure to adapt can leave them vulnerable to significant risk and “stranded assets” – assets that are written down, devalued or converted into liabilities because they haven’t complied with changing regulations and litigation, or adjusted to plain new realities.
It could also reflect knowing how investors appreciate seeing the long-term benefit of innovations that often arise during the effort to curtail a crisis. The swift development of several COVID-19 vaccines serves as the best recent example of what can be achieved when entire industries focus on solving a problem.
In this regard, its easy to see why momentum is gaining behind companies that are positioning themselves as leaders on one of the most definitive issues of our time: reducing the harmful and potentially irreversible effects of climate change. These companies aren’t just stepping up to do the right thing for the planet. They’re attracting the attention of investors for their ability to confront real challenges with bold strategies and an understanding of how their actions can influence and inspire others to strive for similar, and perhaps more striking, results.
Companies that start to pull away from competitors stand to become the preferred partners for other businesses who are taking their own action against climate change. They can also engage like-minded customers who would rather buy products and services from businesses that are committed to fighting this serious environmental challenge.
Guided by science
It’s well known that concentrated and coordinated action is necessary to reduce carbon emissions and curb rising temperatures that, at the very least, pose a threat to the economic survival of future generations, and at most, impacting the physical survival of many of the world’s ecosystems. That’s why many forward-looking companies have adopted the framework of the Paris Agreement, against which to monitor their own carbon emission reductions.
Signed in 2016 by more than 190 countries, including Canada, the Paris Agreement takes a scientific approach to helping governments drastically reduce their country’s carbon emissions. By raising commitment levels every five years, its signatories are endeavouring to achieve a carbon neutral world by 2050 in order to keep average global temperature increases well below 2°C, and preferably below 1.5°C, by the end of the century.[1]
Many companies, especially in developed countries, have already stepped up to the challenge to reach net-zero carbon emissions within a reasonable timeframe. Those that set out to achieve the targets will become known as climate leaders – and the potential future market leaders, since they have the vision and plans to prepare for distant headwinds. Using the Agreement’s framework as a guide, they can chart a clear path towards lowering emissions, helping to prevent the worst impacts of climate change and at the same time, future-proof their business growth.
A new climate-themed fund
Being on the leading edge of investing in good causes can mean strong potential returns. That’s one of the concepts behind Manulife’s Climate Action Fund, compiled of companies across a wide range of industries that are proactively reducing their carbon emissions and getting ahead of the regulations that governments will likely have to impose to meet their commitments as outlined in the Paris Agreement.
As momentum builds, companies with a strong plan to erase their carbon footprint will be well positioned to comply with new regulations and avoid carbon taxes that emerge in the future. Through investment solutions that focus on these businesses, investors too can make a positive difference to the climate challenge at hand. By investing with an eye towards alleviating climate change, investors can share in the success of companies that are planning for tomorrow today and benefit from their potential long-term investment returns.
The Manulife Climate Action Fund is managed by Patrick Blais, senior managing director and senior portfolio manager, Manulife Fundamental Equity Team, Manulife Investment Management. Patrick joined the Manulife team in 2010 and has earned a strong reputation in managing equities. He’ll be supported by Margaret Childe, who leads Manulife’s environmental, social and governance (ESG) team, which has received an A+ from the Principles for Responsible Investment (PRI) for strategy and governance, as well as equity integration, and was named the best ESG team in North America by Capital Finance International (2019 and 2020).
Together, Patrick’s expertise and Manulife’s approach to ESG analysis and engagement will contribute to a global equity portfolio, diversified across sectors, that supports the effort to curtail global temperatures, without sacrificing potential long-term returns. Consider speaking with your clients about placing the [Manulife Climate Action Fund (Fonds d’initiatives climatiques Manuvie] amongst their forward-thinking portfolios.
The importance of E, S and G
All three components of ESG will have a growing influence on equity markets, according to a report by the CFA Institute and Principles for Responsible investment, who asked practitioners around the world whether environmental, social and governance factors “often” or “always” have an impact on share prices.[2] This is one reason why it is important for managers aiming to enhance returns and mitigate risk to adopt an approach that considers E, S and G, even for a climate-themed fund like the Manulife Climate Action Fund.
Already, a commitment to achieve net-zero carbon emissions covers half of global CO2 emissions – and half of global GDP.[1]
“With governments increasingly taking regulatory action against the negative impacts of climate change, we believe companies with a strong plan to reduce their greenhouse gas emissions in line with climate science will be best positioned to outperform the market.”
- Margaret Childe, Head of ESG, Canada
“We’re proud to offer investors a genuine opportunity to make a difference – and generate long-term capital growth – by aligning their investments to science-based targets designed to meet the Paris Agreement.”
- Leo Zerilli, Head of Wealth and Asset Management, Canada
[1] unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
[2] www.cfainstitute.org/-/media/documents/article/position-paper/cfa-esg-integration-canada-web-3pp.ashx
[3] www.un.org/development/desa/dpad/publication/world-economic-situation-and-prospects-december-2020-briefing-no-144/
