Cool as ice? Why hard-to-abate sectors can be net-zero investment opportunities

Steel, cement and shipping will continue to be fundamental to the economy as efforts to achieve a net-zero world progress. They will also be critical to the success of the transition itself.

Such ‘hard-to-abate’ sectors currently account for about 30% of global greenhouse gas emissions. To achieve the Paris Agreement target of limiting climate change to 1.5°C by 2050, technological solutions and resolute strategies must be applied for these industries to significantly decarbonise.

Transition proponents

Why are emissions in these sectors hard to abate? Costs, complications or technological challenges can impede progress. But there are businesses in these industries that are executing credible plans, reinforced by science-based targets, to cut emissions to levels aligned with a net-zero trajectory.

We call these companies ice cubes: by reducing emissions from today’s high levels to meet the target set by the Paris Agreement, they are helping to cool the economy and drive the transition forward.

By adapting their business models and product offering, they aim to mitigate the physical, transitional and liability risks generated by economy-wide decarbonisation, and capture the commercial opportunities it is creating.

Exclusive analysis

Lombard Odier’s recent Sustainable Finance Leadership Course, delivered in partnership with the University of Oxford, educated investors on the merits of looking beyond current carbon footprints to assess temperature trajectories when analysing companies in hard-to-abate sectors.

In this report, which is based on sessions form the event, we provide:

• An overview of hard-to-abate sectors and ways businesses within them can decarbonise
• Why only forward-looking metrics, like Implied Temperature Rise, can help investors identify companies mitigating climate risk and preparing for a fundamentally different economy.

To read the report, please use the download button provided.

For professional investor use only

This document is issued by Lombard Odier Asset Management (Europe) Limited, authorised and regulated by the Financial Conduct Authority (the “FCA”), and entered on the FCA register with registration number 515393.
Lombard Odier Investment Managers (“LOIM”) is a trade name.
This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.
Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
Source of the figures: Unless otherwise stated, figures are prepared by LOIM.
Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.
No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Asset Management (Europe) Limited prior consent. In the United Kingdom, this material is a marketing material and has been approved by Lombard Odier Asset Management (Europe) Limited  which is authorized and regulated by the FCA. ©2022 Lombard Odier IM. All rights reserved.