ESG trends 1 intro copy
Five years ago in Paris, the world agreed to limit global warming to 2˚C. Investors got on board, but the easy part is over. A few exclusions and a portfolio tilt can get you only so far. In 2021, investors committed to aligning with the Paris Agreement face a steeper climb ahead: persuading companies to make radical changes or face a rapidly shrinking universe of qualifying investments.
Honey, I Shrunk the Equity Universe
See How Different Climate Scenarios Might Impact Equity Investment Opportunities
Barring a dramatic policy and technological breakthrough, the availability of Paris-aligned investment opportunities will become increasingly limited with each passing year as the required emission reductions to reach zero emissions grow ever steeper. The interactive exhibit below shows the actions required, and the resulting portfolio construction challenges, to limit global warming at various temperature levels. Use the slider on the thermometer to see the implications at each temperature.
Societal Action Required
No action. Business as usual scenario.
Portfolio Construction Challenge
Option 1: Decarbonize
Option 2: Rebalance
Option 3: Divest/Invest
ESG trends 1 chart footnotes
This calculation is based on a hypothetical portfolio comprising companies of the MSCI ACWI Investable Markets Index (IMI), representing over 8,300 large-, mid- and small-cap companies with available climate-change data across developed and emerging markets, as of Nov. 30, 2020. The data for the warming pathways is provided by Climate Action Tracker’s Global Emissions Time Series dataset. Source: Climate Analytics, NewClimate Institute, MSCI ESG Research.