Climate Action

Climate Pragmatics: How to Make the Climate Great Again

With 2020 ranking among the three hottest years on record, the climate has dominated announcements in recent months, from the US elections to European stimulus plans to the big oil companies’ carbon neutrality pledges.

  • 15 December 2020
  • Coline Pavot, Head of Responsible Investment Research, LFDE

With 2020 ranking among the three hottest years on record, the climate has dominated announcements in recent months, from the US elections to European stimulus plans to the big oil companies’ carbon neutrality pledges. All these announcements have a common goal: mobilising society as a whole so that, by 2050, we can live in a world where the temperature increase remains below 2°C. Faced with this considerable challenge, finance has a major role to play in pragmatically directing capital towards those companies that are shaping tomorrow's world.

Financing the Problem-Solvers

To meet the climate targets of the Paris Agreement, we naturally think of financing those companies that are providing solutions to environmental issues. These solutions can generate a direct environmental impact – like NEOEN, a French producer of renewable energies – or an indirect one, like DASSAULT SYSTEMES, whose software is used to design more efficient vehicles and buildings. This is the financing priority of recent post-Covid stimulus plans, which are allocating capital to energy upgrades, green energy, and sustainable mobility.

Financing Pioneers from all Sectors

But how do you position yourself against more traditional businesses like hotels, textile companies, or even banks? In all these sectors, ambitious and pioneering companies have made strong climate pledges to align their business models with a world where temperature increases are capped at 1.5°C. They are often identifiable by their commitment to Science Based Targets[1], and stand as an example to their sectors, in which they have the power to drive change. To successfully complete this dual project, they need the support and commitment of investors who can stay with them over time.

Financing those Left Behind by the Transition

In the climate race, some companies, such as those in the fossil fuel sector, can get side-lined by investors. Should we exclude them, leaving them in the hands of investors who may be less conscientious? Or should we invest in them, working side-by-side to accelerate their transition? This is the dilemma facing any responsible investor. And the second option is starting to prove effective. In this way, TOTAL has increased its climate commitments, influenced both by Climate Action 100+[2] – a collaborative engagement initiative whose goal is to encourage the largest greenhouse gas emitters to cut their emissions – and by the tabling of an environmental resolution by some of its shareholders at the group's latest general meeting. If the goal is to support the transition of the economy as a whole, can we really do without these players? At La Financière de l'Echiquier, we know we have a role to play with these companies, provided they make serious and sincere commitments! 

Faced with this finding, and the urgent need to act, we’re launching our second impact fund to further the climate transition in Europe by investing in responsible and committed companies. This new strategy is the result of 18 months of work in partnership with an independent expert in environmental engineering, I Care & Consult. In financing these three companies, whose climate maturity is assessed and “monitored” using a proprietary method, this fund offers a pragmatic, innovative response to the challenges of climate change. It’s an investment solution that fits right in at La Financière de l'Echiquier as part of its far-reaching business plan focused on taking climate risks into account.

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[1]A global initiative bringing together public (UN) and private (WWF, CDP, etc.) players whose goal is to drive “ambitious climate action” with science-based targets.

[2]The first coalition of global investors to initiate collaborative engagements with the world's largest emitters of greenhouse gases, to encourage them to reduce their emissions.