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Fund investment ideas

COP28 – where are the opportunities for investors?

Global leaders have pledged to invest in renewable energy, food, and nature to tackle climate change. We take a look at the sectors set to benefit from the economy-wide transition.

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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It was correct at the time of publishing. Our views and any references to tax, investment, and pension rules may have changed since then.

Experts predict that by the end of this year, we’ll have reached global temperatures of 1.4°C above preindustrial levels.

While this might sound minor, every fraction of a degree higher and the likelihood and severity of extreme weather events increases. Not to mention, increased temperatures lead to the ice and glaciers melting, causing rising sea levels.

At 3°C, cities like Tokyo, Mumbai, New York, and London will be partially or fully underwater. The world is currently on track for 2.9°C of warming.

This is why leaders from across the world have come together in Dubai for COP28, pledging action to limit global warming at 1.5°C and rewire the economy.

The science says that to do this, the world has to reduce emissions by 43% by 2030 and by 2050, to reach net zero.

The image below shows a graph of global CO2 emissions per year, over the last 150 years alongside the global target for the next 50 years.

MicrosoftTeams-image (9).png
Source: Global Carbon Project 2022.

To reach these all-important reductions we need significant change to our energy supplies, food systems, and our relationship with nature – and with change comes investment opportunities.

Key takeaways from COP28

  • Global leaders have agreed to transition away from fossil fuels

  • Nations have pledged to triple renewable energy capacity and double energy efficiency by 2030

  • The first ever roadmap to transform our food systems to net zero has been defined

  • Over $2.5bn has been mobilised to protect and restore nature

What does this mean for investors?

In the ongoing transition away from fossil fuels, investors have to assess their portfolio's exposure and decide whether they want to bear the burden of stranded asset risk.

It’s encouraging that over 40% of global oil producers have signed a new charter pledging to decarbonise at COP28. However, not all companies are aligned with the transition toward net zero emissions. So, investors exposed to fossil fuels should weigh up the associated risks before deciding to invest.

While COP28 has highlighted the weakening prospects for long-term growth in fossil fuels, it’s unveiled a range of opportunities in the new, clean and green economy. Tripling the increase in global renewables could see solar and wind making up 40% of global electricity generation by 2030.

Companies spearheading the transition to green energy, like renewable energy providers, solar panel and wind turbine manufacturers, and those involved in developing energy storage solutions, could be poised to reap the benefits.

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The UN’s roadmap for food and farming was another major area of discussion. It’s the first instalment of a plan to reform the world’s food systems, reducing emissions and catering to a growing population, while still maintaining food security and nutrition.

It covers livestock, crops, food loss and waste, forest and wetlands, fisheries and aquaculture, as well as soil and water. The transformation needed in these areas will benefit some companies while harming others, so it’s important to be aware of it.

Recognising the link between nature and climate is important, and leaders at COP28 have pledged billions of dollars of investment for helping restore nature.

Investors could consider exploring opportunities in companies dedicated to conserving and restoring forests, oceans, and overall biodiversity, aligning with nations' declarations to amplify investments in this pivotal area.

This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Investments and any income from them will rise and fall in value, so you could get back less than you invest.

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Written by
Tara Clee
Tara Clee
ESG Analyst

Tara's part of our ESG Analysis team. She is passionate about climate change and helping clients invest responsibly.

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Article history
Published: 14th December 2023