Investing in the fight against climate change

investment viewpoints

Investing in the fight against climate change

Christopher Kaminker, PhD - Head of Sustainable Investment Research & Strategy

Christopher Kaminker, PhD

Head of Sustainable Investment Research & Strategy
Kristina Church - Senior Investment Strategist for sustainable investment

Kristina Church

Senior Investment Strategist for sustainable investment

The world is in urgent need of a climate transition. An increasingly vital function of the financial sector is to match investor capital with projects that directly address the looming threat of climate change.

LO Funds Global Climate Bond was launched in March 2017, as a result of a strategic partnership between Lombard Odier Investment Managers (LOIM) and Affirmative Investment Management (AIM). The latest LO Funds Global Climate Bond Impact Report details how investors have supported efforts to mitigate climate change and promote resilience to its effects. In 2019, the fund supported more than 1,350 related projects and initiatives.

In 2019, the majority of the projects supported were in relation to infrastructure. A recent report from the Intergovernmental Panel on Climate Change (IPCC) stressed a vital need to achieve large scale transitions in infrastructure in order to meet the goals of the Paris agreement and infrastructure is a key pillar of the EU’s Green Deal. The infrastructure sector accounted for 57% of the portfolio in 2019, including clean transport networks green buildings, resilience measures, information and communication technology. Transport was the main beneficiary within this sector, at 49%.     

In terms of how the projects supported by the Fund approach emissions, the 2019 portfolio was primarily concentrated on mitigation efforts. Whereas adaptation efforts are a direct response to the effects of climate damage, mitigation efforts are concentrated on reducing greenhouse gases (GHGs) in a carbon-constrained world. In 2019, 77% of the portfolio was devoted to mitigation-focussed activities.

The fund also continues to support all 17 of the UN Sustainable Development Goals (SDGs), which aim to eradicate poverty, fight inequality, and tackle climate change. The fund’s largest allocations in 2019 were to affordable and clean energy, sustainable cities and communities, and climate action. Projects frequently support more than one goal, however.
Norway’s Ullerud Health Centre serves as an example of one project spanning several SDGs. The largest mass-timber health centre in Norway, Ullerud is constructed from environmentally certified materials and sources heat and hot water from on-site geothermal boreholes and waste heat from a data centre. The centre is also host to a 108-bed nursing home which provides a high level of care for residents. Ullerud therefore supports SDG 3 (good health and well-being), SDG 7 (affordable and clean energy), SDG 11 (sustainable cities and communities) as well as SDG 13 (climate action). 

Other projects and initiatives supported by the portfolio include the development of solar and wind power across India, climate-resilient agricultural systems in China, and efforts to improve the connectivity and transmission of renewable power in Finland. The fund also supported global vaccine coverage through the International Finance Facility for Immunisation (IFFIm). The World Health Organisation estimates that 15 million people die every year from vaccine-preventable diseases. The IFFIm operates immunisation programmes in 70 of the poorest countries on Earth and has been involves with more than 300 vaccine campaigns in Africa. 

Investors should be able both to make a material difference to the environment and grow their investments in a sustainable fashion. As investment professionals, we have a role to play in investing in companies that seek to provide climate mitigation and adaptation solutions. Our diversified bond portfolio seeks to create a positive impact, while aiming to provide both a higher yield and lower turnover than a typical investment grade portfolio.

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Download report

 

The latest LO Funds Global Climate Bond Impact Report details how investors have supported efforts to mitigate climate change and promote resilience to its effects. In 2019, the fund supported more than 1,350 related projects and initiatives.

 

  Click here to download the report

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