Climate change: for investments with a positive impact


Why rhyme investment with positive impact? David Seban-Jeantet, CIO at Societe Generale Private Wealth Management, provides some answers.

Summer is coming to an end and, if the sun seemed to shine much brighter than last year, it is not just a result of coming out of the confinement. Giant fires devastated thousands of hectares of forest in Australia earlier this year, and more recently in California. Already, NASA meteorologists are predicting that the year 2020 is likely to be the warmest year on Earth on record.

But the rise in temperatures is not inexorable and action can be taken now. This is the purpose of the Paris agreements, which aim to adopt a holistic approach combining energy frugality and technological innovation. It is also the challenge of positive-impact investment, which, beyond a sustainable and reasonable investment, makes it possible to tangibly curb the growth of greenhouse gases, the main component of global warming.

Source: Boden, T.A., Marland, G., and Andres, R.J. (2017). Global, Regional, and National Fossil-Fuel CO 2 Emissions.

In order to achieve the ambitious "zero net emissions" objective of the Paris Agreements, solutions must be developed in different areas such as energy efficiency, renewable energy, but also sustainable agriculture and transport. The carbon footprint of companies is a key indicator, but must logically be complemented by a dynamic analysis of all industrial processes. Some companies have also announced quantified environmental commitments: "science-based targets". The proactive approach of companies is a determining factor here, as is their ability to influence their industry through breakthrough technological choices.

In Europe, the movement is already well underway and one third of the European recovery plan will be oriented towards green technologies. The Old Continent is bursting with innovation, with the ambition of creating a new industrial sector, particularly with hydrogen. And for good reason: hydrogen makes it possible to significantly increase the autonomy of electric vehicles: it is estimated that one kilogram of hydrogen makes it possible to travel 100 kilometers in an electric vehicle equipped with a fuel cell. In the United States, on the other hand, the results of the presidential election will set the tone, since the scheduled release of the Paris Agreements is set for the day after the election.

Positive-impact investment does not come at the expense of performance, quite the contrary. Climate leading companies will benefit from increased growth and visibility. Conversely, failing to take climate issues into account risks weighing significantly on performance. The phenomenon is already well illustrated by "stranded assets", those toxic assets on the balance sheet of companies that cannot be developed because their carbon footprint is too large.

Positive-impact investing responds to a growing demand from investors who wish to give meaning to their investments by benefiting from the assurance of financial management with a long-term perspective.

Published in Paperjam, October 2020

Chief Investment Officer Société Générale Private Wealth Management