Rather than avoid the problem by using negative screening to move capital away from high emissions sectors, Manulife Investment Management says it is these same sectors, ironically, which hold the key to a low-carbon future.
In their most recent note to investors, the firm says having the biggest positive climate impact requires a more nuanced approach.
“Well-intentioned, climate-oriented investors are using a variety of approaches to align their capital with the future they want to see,” the report’s authors write. “We explore why a strategic and proactive approach might be more effective in both combatting climate change and capturing value from industries leading the low-carbon transition.”
They add: “the reality is that transitioning to a sustainable future is complex, and fossil fuels, along with some other carbon-intensive industries such as mining, will have a role to play in it.”
While climate-oriented investors tend to avoid heavy polluters altogether, the firm considers four investment themes when considering its options. The themes discussed include low-carbon energy, transition materials, electrification and efficiency and resource scarcity. “While we understand the idea of not supporting companies that are damaging the environment, we believe that investors who focus only on low-emissions companies aren’t leveraging the opportunities that low-carbon transition offers.”
Entitled Climate change: don’t avoid the problem, be part of the solution, the report includes case studies and examines the challenges associated with moving away from fossil fuels – “no easy task,” they state. “Moreover, there are areas where it’s structurally difficult to replace fossil fuels and where technology isn’t there yet.”
