The most immediate and tangible impact on reducing carbon emissions can be achieved by helping high emitters that are restructuring their business models and repositioning themselves for a greener economy – companies often referred to as “carbon improvers” – to transition faster and more efficiently.
Carbon emissions are concentrated in a handful of sectors: over 80% of scope 1, 2 and 3 emissions are generated by sectors representing less than a quarter of the market. These sectors represent about 40% of global gross domestic product, and their products are indispensable to our way of life. In order to be on the path to net zero, companies within these sectors must make radical changes to their business models, because reducing their environmental footprint will lead to an immediate and tangible impact in the real world.
WHY SHOULD INVESTORS CARE?
We believe that certain transitioning companies are undervalued relative to their economic potential, which creates an investment opportunity. There are many businesses that are currently perceived as transition laggards, predominantly due to the market’s heavy penalization of perceived transition risk based on sector-level views. Such underappreciation creates mispricing and alpha potential. In the context of the environmental transition, many of these companies will still be relevant in the future green economy and may even be critical in enabling sustainability commitments. We have already seen select examples in certain industries where a company’s transition can create value. It is our role as active managers to identify these companies, select, monitor, and catalyze their transition progress over the long term.
You can now read the full whitepaper at the link below
