sustainable investment
‘Net zero will reorganise value chains’: Höhne-Sparborth joins Hymans Roberston podcast
With the transition to net zero a crucial investment theme, how can investors reduce exposure to climate risk while targeting growth opportunities?
As nations seek the Paris Agreement goal of limiting warming to 1.5°C, investors face the challenge of identifying companies that navigate the physical, transitional and liability risks of economy-wide decarbonisation. Thomas Höhne-Sparborth, Head of Sustainability Research at Lombard Odier, assessed the dimensions of this task in Hymans Robertson’s latest podcast episode: ‘Getting to next zero in practice’.
He was joined by Mhairi Gooch, Senior Responsible Investment Consultant at Hymans Robertson, who explained that aligning an investment strategy with net zero requires maintaining a diversified portfolio that identifies companies on a strong decarbonisation path.
“We think a good net zero strategy is one that is much more forward-looking; that is thinking about cumulative emissions through time and at a sector and regional level; as well as real world changes. This needs to be done across asset classes,” Gooch said in the podcast.
“We also need to think beyond emissions. We have to be focused on interconnected issues like the social implications, nature and biodiversity loss. We can’t have a net-zero strategy that isn’t nature positive.”
Höhne-Sparborth explained that effectively positioning a portfolio for transition means targeting real decarbonisation across all sectors of the economy, and allocating capital to companies that are making the transition happen.
“This transition is not just about producing stuff in a greener way: it is a fundamental rethinking of how we consume, produce and organise our lives,” he said.
For investors, “it is ultimately about how the value chains we invest in will be reorganised.” This requires analyses beyond environmental, social and governance metrics.
“We are not going to get to net zero simply by looking at environmental, social, and governance scores or a carbon footprint. To navigate this transition as investors, you need to delve quite deeply into some of these sectors to try and understand what that change is going to look like, and then bring to that a forward-looking perspective with the right expertise and mind-set.”
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