The rise of transition finance
The vast financing required to transition to a decarbonised global economy presents diverse opportunities for investors. ‘Transition investments’ exist across industries, regions and asset classes – our experts explain how to identify and evaluate them.
Transition talks
Episode 2: Company transition plans
In this interview, we speak to Bridget Beals, Head of Climate Risk & Strategy at KPMG who talks to us about the engagements she’s having with companies across public and private markets and the transition plans she’s seeing from these companies.
Introduction to transition investing
The term ‘transition investing’ describes allocations that finance progress towards net zero. It covers investments in industries and infrastructure that are helping the energy transition, as well as targeting high-emitting sectors that require substantial financing to implement their climate strategies. Critical to transition investing is having a credible way to determine which companies can effectively transition.
Investing in the transition can take the form of equity or debt, as well as project financing.
Enabling the transitionInvestments in industries and infrastructure enabling the energy transition. |
Focusing on high emittersInvestments in high-emitting sectors where credible climate transition plans require financing. |
Examples include:
- Investments in high-emitting, hard-to-decarbonise industries such as steel, cement and chemicals, supplying them with the capital they need to decarbonise.
- Investments in high-emissions regions, particularly emerging markets, providing capital to facilitate progress towards net zero.
- Investments in the infrastructure transformations required to achieve net zero, such as upgrading electrical power grids and transmission systems.
- Investments in decarbonisation innovations and projects, such as green hydrogen and carbon capture and storage.
Understanding the transition
A disorderly transition
The path to net-zero is not simple or linear. It’s complex and probably messy. But in disorder there is opportunity.
Evidence suggests the transition to a low-carbon economy will be disorderly. By allocating to ‘transition assets’, investors can mitigate some of the disorder, while potentially generating positive outcomes for their portfolios.
This research paper makes the case for transition investing and explains how to identify a true ‘transition asset’.
Why corporates must act
Written by independent researchers from Imperial College London and Reading University.
The physical impact of climate change already affects the productivity of corporates on a global scale and across sectors – but financial markets do not currently price in the full range or magnitude of these risks. The pace at which corporates embrace and implement transition strategies will determine how fast and prevalent physical risks will rise.
The study by experts from Imperial and Reading, led by Dr Ajay Gambhir, brings to life the extent of physical risk to corporates and the potential scenarios that might follow. This research integrates financial markets with the science of climate change.
Essentials of net-zero investing
Carbon data is backward looking and needs a better measure at a sovereign level explains Portfolio Manager Nicolas Jaquier. In an interview with Sustainability Director, Daisy Streatfeild, he outlines the unique challenges he and the team face when measuring and assessing the net-zero impact of countries and how to align portfolios to this goal.
Accessing transition investments
Find out how Ninety One is incorporating ‘transition’ into its investment research and analysis
Read the paper Ninety One’s net-zero strategy
For more information on dedicated transition investing, contact your local team to meet our transition experts