Five funds tackling climate change

After ‘Furnace Friday’ it felt like ‘Melting Monday’ yesterday, as I sat at my desk at home, trying to ignore the heat and get on with some work, whilst thinking longingly of the air-con in our office.

From France’s record-breaking 45.9C last year, to a record-breaking 38C in the town of Verkhoyansk in Siberia this year, climate change is contributing to more frequent, severe, and longer heat waves all around the world.

Climate change could be worse than COVID-19

While we had a glimpse of what a decarbonised world might look like during the global shutdown, as car and air traffic came to a halt and polluting factories closed, Deidre Cooper, co-manager of Ninety One Global Environment fund, has warned that the perception that the coronavirus is helping to tackle the climate crisis is not only bogus but dangerous.

“Global carbon emissions might fall by 5% this year” she said, “but this is a blip in the trend of recent decades, and they’ll resume their former trajectory when the economy starts to recover.”

This is a view shared by Bill gates, co-founder of Microsoft, who says that this small reduction in greenhouse gases is unsustainable, because it relied on lockdowns rather than actual solutions for climate change.

Bill Gates has also warned that while COVID-19 has been awful, the climate change crisis could be even worse. "By 2060, climate change could be just as deadly as COVID-19,” he wrote in his blog, “and by 2100 it could be five times as deadly.” And economic damage from climate change would be the equivalent of having a COVID-19 pandemic every decade, he said.

Government policy and climate change

It is estimated that, in order to reach global temperature goals of a maximum 2C rise, $2.4 trillion per year will need to be spent or reallocated. That’s a huge amount of money, but there are some other economic incentives: recent analysis by the International Renewable Energy Agency estimates that investments in energy transition could have a 5x multiplier effect on economic growth (GDP). In addition, they believe that the transition to a low-carbon economy should also have a positive impact on job creation and they estimate c.40m jobs being created globally by 2050.

“Government policy is a key influence on where, how and how fast decarbonisation drives economic growth,” Deidre Cooper continued: “Overall, we have no doubt that government policy will continue to support the energy transition, near-term delays notwithstanding. But the pandemic clearly alters national policy priorities, budgets and political climates. Some of these changes could massively spur businesses positively exposed to decarbonisation, other may create headwinds.”

While the US government remains a ‘wildcard’ in terms of its approach to climate change, thankfully the UK’s recent mini-budget and the EU Recovery Plan both included policies to help tackle a number of climate change issues.

Five funds investing in climate change solutions

The battle against climate change is not just down to governments – individuals and companies also need to do their bit. Here are five funds investing in climate change solutions for investors wanting to play their part too.

Pictet Global Environmental Opportunities

This global equity fund has identified nine environmental challenges including but not limited to; climate change, ocean acidification, biodiversity and freshwater use. All companies within the portfolio must operate 'within a safe operating space' for each of these nine areas and actively contribute to solving environmental challenges.

Ninety One Global Environment

Launched in December 2019, Ninety One Global Environment is a global equity that has a unique approach of only investing in companies that are contributing to the decarbonisation of the world economy. The fund is set to benefit from the massive tailwind of the $2.4 trillion of annual spend required to meet global temperature goals.

Rathbone Global Sustainability

As well as excluding companies with unethical practices, this global equity fund looks for positive factors from its holdings, including good employment practices, or a product or service that solves environmental challenges. These positive factors are linked to the UN's Sustainable Development Goals.

VT Gravis UK Infrastructure Income

This fund invests mainly in investment trusts exposed to different types of UK infrastructure; from railways and roads to GP surgeries and solar power. It has an income target of 5% per annum, which is distributed quarterly. The portfolio currently has around 40% invested in renewable energy, solar and wind power*.

Guinness Sustainable Energy

This fund invests in companies involved in the generation, storage, efficiency and consumption of sustainable energy sources (such as solar, wind, hydro, geothermal, biofuels and biomass). It is positioned to benefit from many of the long‐term themes associated with the transition towards a lower carbon economy and of sustainable energy.

*Source: fund factsheet, 30 June 2020

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and do not constitute financial advice.

Published on 11/08/2020