Low-Carbon Investing Needs an Active Eye on Quality

Equity investors focused on a low-carbon strategy needn’t compromise on company fundamentals. When quality and compelling valuations are equally considered, joining the global fight against climate change and generating strong return potential can work hand in glove.

At the UN’s recent COP26 climate summit, world leaders made ambitious pledges to combat global warming, but also appeared more concerned than ever of the hard work ahead. Delivering on their promises will be challenging, so it will take a collective effort to reach their goals. And equity investors can play a big role—lowering carbon emissions while meeting returns goals—with the right approach.

The Climate Task Is Monumental and the Stakes Are High

The COP26 gathering proved even more groundbreaking than the landmark 2015 summit, which spawned the watershed Paris Agreement. Among many resolute goals codified this year, the US outlined a record $555 billion in funding for clean energy projects as part of its Build Back Better infrastructure package. Additionally:

  • G20 leaders agreed to halt funding of overseas coal power plants
  • China and India, top greenhouse gas emitters, committed to net-zero emissions by 2060 and 2070, respectively
  • South Korea will reduce greenhouse gas levels by 40% by 2030 and—with other countries—cut methane by 30%
  • Canada will phase out coal-fired electricity by 2030
  • Denmark will reduce emissions by 70% by 2030
  • Italy has pledged to triple its climate protection budget commitment to $1.4 billion

While the shared goals were inspiring, the general mood was sober. The new and long-known science still points to the need to do more. And the next decade will be make or break. With little time to spare, countries, businesses and investors alike are being asked to do their part to directly or indirectly help lower emissions as 2030 approaches.