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How can investors fight climate change?

Please be reminded that this article serves to illustrate how it is possible to invest in line with this theme. In using the funds and companies as examples, this does not constitute a recommendation to invest in these, or any other investment. Barclays has not undertaken a review of these funds, nor are they part of a Barclays Select list. If you’re not sure where to invest, you may want to seek independent advice.

Investments may fall as well as rise in value; and you could get back less than you put in.

Climate change is one of the greatest challenges of our time. We explore ways investors can effect change.

Click to toggle accordion What you’ll learn:

What are some of the effects that climate change is having?

How companies are helping to tackle climate change.

How impact investing gives you access to these companies.

Climate change is happening at a rapid rate, but there are a growing number of ways investors can play a part in tackling the enormous challenges it brings.

The planet has warmed by an average of 1˚ C in the past century.1 Whilst this may not sound like a lot, even seemingly small changes in the climate can have potentially catastrophic consequences for people and the planet.

We explore some of the impacts of climate change and what investors can do to help combat it.

The impact of climate change

We are already seeing more extreme weather events, such as more frequent and severe hurricanes, increased droughts, declining arctic sea-ice, and changing species behaviour like birds migrating early, which can be attributed to climate change.

Global warming caused by high levels of greenhouse gases in the atmosphere is linked to the burning of fossil fuels like coal and oil, and to changes in land use, including clearing land for cattle grazing.  Cutting down forests, one of our major natural storage ‘sinks’ for carbon, is increasing the imbalance between the CO2 we emit and the world’s capability to re-absorb it.2

Extreme weather is affecting agriculture and food production, and taking its toll on individuals, businesses, communities, governments, and life on land and in the sea. For example, flooding may halt agricultural productivity in a particular area, which can lead to sharp price increases to the cost and distribution of staple foods.

Climate change also disproportionately affects women and girls, as in many countries they are primary caregivers and providers of food. For example, during a drought they may have to walk much further to find water, increasing their work-load and leaving them more vulnerable to disease.3

As temperatures continue to rise, further challenges are likely to emerge. New pests, diseases and species could spread to regions they haven’t previously inhabited. These will bring increased risks to people, animals and the natural environment. For example, warming UK temperatures may bring exotic diseases if insects like virus-carrying mosquitoes travel and breed outside their native habitats.4

How investors can help tackle climate change

These challenges, both locally and globally, may feel overwhelming.  It’s certainly tempting to continue as we are and not to think about them. However, with significant funding and infrastructure investment many of these escalating risks and issues can be addressed.  

Some forward-thinking companies are working hard to develop innovative products and services to adapt to these changes or to mitigate their effects. They’ve recognised finding solutions to our environmental challenges can create strong market opportunities for growth.

As investors, our money provides the capital that finances these companies. With impact investing, you can choose to invest in funds and companies that are minimising their contributions to or actively addressing these environmental challenges.

Choosing for your portfolio and the planet

If you want to invest to make a positive contribution to the planet, you have options both in types of funds and their investment strategies. Let’s look at a few examples to explain how they work.

Some funds invest across all industries and look for companies that minimise their negative environmental impact. Others are more proactive about investing in shares and bonds where the businesses deliver products and services that provide solutions to climate change challenges.

For example, Pictet Global Environmental Opportunities Fund invests in companies from all over the world in clean energy and water, agriculture, forestry and other areas of the environmental value chain. This includes companies like AO Smith Corporation, a global manufacturer of energy-efficient water heaters, purifiers and treatment solutions. Their water solutions can help adapt to the challenge of dwindling clean water sources caused by climate change.

Another example is the world’s first Green Bond Exchange Traded Fund (ETF), the Lyxor Green Bond ETF. As an ETF, it aims to have the same holdings as an index, in this case Solactive Green Bond EUR USD IG Index. Green bonds are debt issued by companies, development banks, or countries whose proceeds are solely used to finance eligible green projects that address climate change. One bond was issued by Greenko, one of India’s leading renewable energy companies, that generates and distributes energy from wind, solar, and water generated power across thirteen states in India.

And if you don’t want to find and mix individual funds to build your portfolio, you may want to consider the Barclays Multi-Impact Growth Fund.  This fund invests primarily in other funds that are chosen based on both their potential for strong financial returns and the consideration of their impact.

The Multi-Impact Growth Fund includes both social and environmental focused funds.. For example, Impax Environmental Markets invests in small and mid cap companies which have >50% of their underlying revenue generated by sales of environmental products or services in the energy efficiency, renewable energy, water, waste, and sustainable food and agriculture markets.

A current holding in this fund includes Tomra, the world’s leading provider of ‘reverse-vending’ machines. These accept used bottles and cans, often giving back a deposit or refund to the user. Every year, Tomra facilitates the collection of more than 35 billion empty cans and bottles which are then recycled wherever possible.

Please be reminded that this article serves to illustrate how it is possible to invest in line with this theme. In using the funds and companies as examples, this does not constitute a recommendation to invest in these, or any other investment. Barclays has not undertaken a review of these funds, nor are they part of a Barclays Select list. If you’re not sure where to invest, you may want to seek independent advice.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.

Impact investing

Through impact investing you can combine your financial goals with your societal and environmental ambitions.


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