Sustainability is not boring

INVESTORS MORE KEEN ON SUSTAINABLE INVESTING

neutral behaviour sees the implied temperature fall, “bad” behaviour sees it rise.

Currently, indicators point to 4.1°C global temperature rises over pre-industrial levels – well ahead of the 2°C agreed to under the Paris climate accord.

This tension is particularly apparent in the transport industry, with oil producers on one hand and electric vehicle makers on the other, says Schroders’ Jessica Ground.

The growth in electric car sales supports a fall in the implied temperature rise.

EV Sales reports over half a million electric cars were sold in 2017’s first seven months, growing more than 40% from 2016. A similar trend in the rest of 2017 would put the market on track to reach around 1.1 million vehicles this year. The industry’s growth looks likely to stay strong, putting the electric car industry on track for growth consistent with the Paris agreement.

The oil industry reverses these gains. Two-thirds of the world’s oil production is used in transport, half of which in passenger vehicles, making cars the world’s largest source of oil demand. Despite investment cuts in recent years, the energy industry continues to invest at a pace consistent with 5.4°C temperature rises.

While the automotive market gears up for an electric future, oil producers have yet to respond with sufficient cuts, Schroders notes. The energy industry has yet to adjust to the prospect of peak demand and slower growth. Unless it does, the crash ahead may be painful for companies without contingency plans.

We can’t change the world, but we can steer our investments in a way that tries to improve it.

This article was published on investor. moneyweb.co.za