CLMA Whitepaper
Part 1: Introducing the iClima Global Decarbonisation Enablers UCITS ETF
Part 2: The Danger of Climate Change
Part 3: Global Tailwinds: Raising Awareness of Climate Change
iClima Global Decarbonisation Enablers UCITS ETF
Setting the stage for our climate change ETF
With this greater awareness of the dangers of climate change
and the need to act urgently, regulatory and consumer behaviour has ramped up
to meet this challenge.
Regulatory Factors Influencing Climate Investments
Regulation across the globe has been enacted or is in
consideration to incentivise companies and individuals to lower emissions. Some notable examples of global regulation
include:
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The 2015 Paris Agreement: a legal instrument to guide global action on climate change with binding and non-binding provisions.
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EU Green Deal underway: the European Commission defined a set of policies aimed at reducing CO2e emissions by 55% by 2030 and making Europe climate neutral by 2050. To finance these policies, an investment plan of €1 trillion will be put in place.
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New EU ESG regulations such as “suitability rules” requiring client’s ESG preferences to be taken into account by investment advisers and insurance intermediaries, and eco labels for financial products.
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The UK was the first country to announce mandatory disclosure requirements for companies along the guidelines in the Task Force on Climate-Related Financial Disclosures (TCFD). This will be required by 2023 for some disclosures, and by 2025 for all. Other countries are expected to follow.
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China’s commitment to being net-zero by 2060, announced in September 2020, will require it to double annual investment in solar, quadruple investment in wind, and increase its efforts to develop green hydrogen, energy storage and offshore wind.
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US potential green deal and return to Paris Agreement: Democratic-led US government has stated its intent to return to the Paris Agreement and announced a Green New Deal with the goal of meeting 100% of power demand through zero-emission energy sources.
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Market Forces
Influencing Climate Investments
In addition to regulatory factors, consumer preference has
also been shifting to a more climate-aligned approach. Notable examples include the following.
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New installation costs for renewable energy are cheaper than fossil fuel-based alternatives[1].
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Plant-based food market expected to reach $74.2bn by 2027, an 11.9% CAGR increase over seven years[2].
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Electrification of transport: electric vehicle sales rose 40% in 2019 comprising 2% of all care sales[3], and forecast to comprise 32% by 2030.[4]
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Shared economy continues trend of increased adoption, the global ridesharing market is expected to grow to $117.3B by 2025[5].
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Technology adoption continues to deepen, with greater “smart” energy efficiency products.
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75% of Millennials believe their investments can influence climate change[6]. Growing focus on impact of investments, potentially through a climate change ETF.
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1% of the world’s land will be occupied by cities and 60% of the world’s population will be living in the cities in 2030.
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