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For Professional Clients and, in Switzerland, for Qualified Investors only. In Israel for Sophisticated Investors only. BNY Mellon Investments Switzerland GmbH is a financial services provider in Switzerland and is required to categorise clients, excluding financial intermediaries, in accordance with the Financial Services Act (FinSA). For the purposes of this communication, we have categorised you as a professional client. Professional clients are entitled to provide notification in writing if they wish to be re-categorised.
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IDEAS AND KNOWLEDGE TO INSPIRE YOUR INVESTMENTS THINKING
21 April 2022

The uneven path to carbon reduction

It is important to keep in mind that Responsible Investment is a spectrum of investing styles and that even the most sustainable investments can include companies which might today be scoring less well on ESG criteria.

 

Further, for all those concerned, we need to see greater focus by investors on identifying companies that are not simply ‘best-in-class’ on ESG issues today but also those which are transitioning to align with a lower-carbon world, or better social values.

 

If we were to rely only on external providers of ESG data and static scoring systems, we might be limited to a small number of ‘ESG champion’ investments, while potentially missing out on the extensive opportunities others outside this classification might offer.

 

Investing solely in these types of investments risks attracting a disproportionate amount of inflows to this area. This could result in overcrowding in favoured stocks and sectors, whilst also directing flows away from sectors which are vital for future economic growth, and most desperately need investment to achieve the necessary transitions.

 

If we take climate as an example, ‘dirty’ carbon-intensive industries (such as cement, heavy-duty transport, steel, and chemicals) face the most significant net-zero transition challenges and costs. We will continue to need these industries for future growth, therefore without financing their transition, net zero will be impossible to reach.

 

Kristina Church, head of responsible strategy, BNY Mellon Investment Management.

 

Doc ID: 953175

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