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SECTION 2 : TRANSITION TO NET-ZERO
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A framework for low carbon investing
CTB benchmarks target an annual decarbonisation of 7 %
Author : J . P . Morgan Asset Management
Climate change impacts everyone , and its effects can already be seen today . With more than half of the world ’ s population living within 60km of the sea , rising sea levels are posing an increasing risk to people ’ s livelihoods and homes .
Water scarcity can at the same time lead to drought and famine in developing countries , while floods contaminate freshwater supplies , increasing the risk of water-borne diseases . Rising temperatures will also disrupt agriculture and food production , increasing the prevalence of mal- and undernutrition . The consequences of climate change are devastating . We must act now to limit the worst impact .
Policy changes will affect corporate profits
Climate change is therefore a topic that is top of mind as it is having a material impact on the world we live and work in today . In response to this challenge , countries across the globe have signed up to the Paris Agreement , a legally binding international treaty , which is trying to limit global warming to well below 2 ° C . In 2019 , the UK and France became the first major economies to sign a net-zero 2050 target into law . Today , more than 70 countries have set net zero targets , accounting for 76 % of global emissions . In order to achieve these targets , policymakers have pledged to adopt aggressive emission reduction policies . That means we will need to reduce our use of fossil fuels and importantly increase our use of renewable energy sources such as solar and wind power .
For investors , the way that policymakers approach the path to net zero will have a meaningful financial impact on the companies in their portfolios , both operationally and financially . If , for example , governments implement higher carbon taxes , it will directly impact companies ’ net income . New environmental regulations or increased subsidies for greener forms of energy could also benefit companies already moving in a more sustainable direction by investing in cleaner forms of energy . As a result , there will be both opportunities and risks across industries . Importantly , for most industries , emission reduction rather than offset ( paying others to reduce emissions or absorb CO2 to compensate for your own emissions ) will be required , and investors should view corporate commitments with this in mind .
Positioning for the transition to a low carbon world
The JPM Carbon Transition Global Equity ( CTB ) UCITS ETF ( JPCT )* has been
16 ESG Unlocked : Sustainable Revolution In Full Swing October 2022