Climate change is not just a challenge for the global community. It has also become a key issue for investors.
There are several reasons why investors want to invest in a climate-conscious manner. On the one hand, the focus is on the greater sense of responsibility of investors. This means that a growing number of investors would like to ban coal and Co. from their portfolios and invest in line with their convictions. On the other hand, it has been shown that a good carbon footprint of companies also tends to pay off on the stock market. For example, if you compare the MSCI climate indices with the corresponding standard indices, the climate-friendly variants for all important regions are ahead over one, three and five years.
Climate indices are ahead
Past performance is not a reliable indicator of future results.
Source: MSCI as of July 31, 2020 (MSCI World Climate Change Index, MSCI EM Climate Change Index, MSCI Europe Climate Change Index, MSCI AC Asia Pacific Climate Change Index and the respective standard indices)
Green Deal as a roadmap for EUR 750 billion EU investment program
The topic should also receive further impetus from politics – in the form of stricter climate laws and investment programs worth billions. The EU recently launched the largest financial package in its history. In addition to the budget, the heads of state and government agreed on a development fund with a volume of 750 billion euros, which will focus on the Green Deal as a roadmap for a sustainable economy. Among other things, this envisages the change to a climate-neutral economy by 2050 and the decoupling of economic growth from resource use.
In the past, investors mostly focused on actively managed funds when investing in climate change. In addition, there have been corresponding index products for some time. As a pioneer in the field of climate-friendly indices, Amundi developed the MSCI Low Carbon Leaders index family together with investors back in 2014. Thanks to more extensive climate data and two new EU climate benchmarks, a new generation of climate indices was recently launched with which investors can integrate climate targets even more effectively into their portfolios.
The EU climate benchmarks: two ways – one goal
In terms of content, the benchmarks focus on a noticeable reduction in carbon intensity and constant progress in CO2 savings. Both are geared towards the Paris climate goals and call for an annual decarbonisation of seven percent compared to the previous year. The Climate Transition Benchmark aims to transition to a low-carbon economy while maintaining a broad market positioning. A 30% reduction in CO2 intensity compared to the standard index is required. The Paris-aligned benchmark goes a step further and is geared towards meeting the warming limit faster. Together, they provide a framework for index providers, asset managers and investors to drive cost-efficient climate index investments.
Amundi was one of the first asset managers to launch ETFs based on the new EU climate index benchmarks, with the following ETFs being offered.
Transition to a climate-friendly economy with broad exposure
Fast transition to a climate-friendly economy by excluding CO2-intensive sectors
The indices used by Amundi ETF are based on positive and negative screenings, the reweighting of stocks in the index and extensive data on direct and indirect issues. Analyzes of the corporate strategy and the transition risks associated with CO2 emissions are also included. In addition to selecting the right index, climate and ESG investors should also pay attention to the ESG performance of the asset manager. It is important to choose an asset manager like Amundi who actively exercises his voting rights at general meetings and who is consistently involved in contact with companies but also socially and politically.
By Hermann Pfeifer, Head of Amundi ETF, Indexing & Smart
Beta – Germany, Austria and Eastern Europe
Legal information: Unless otherwise stated, all information in this document comes from Amundi Asset Management as of October 5th, 2020. The assessments of economic and market developments presented in this document are the current views of Amundi Asset Management. These assessments can change at any time due to market developments or other factors. There is no guarantee that countries, markets or sectors will perform as expected. These opinions should not be viewed as investment advice, recommendations for any particular security, or an indication to trade on behalf of any Amundi Asset Management product. There is no guarantee that the forecasts discussed will actually materialize or that these developments will continue.
Source: BÖRSE ONLINE