The fight against climate change also involves the investments of small savers. In fact, everyone can choose to support companies engaged in the energy transaction, the process that aims to reduce the use of fossil fuels to reduce CO2 emissions and thus safeguard the environment. Investments, as always, can be directed to individual securities, funds, or ETFs, instruments that passively replicate the performance of certain indices.
- benchmark indices replicated by ETFs that fight climate change are two and they were wanted and defined by the European Commission:
- climate transition
- Paris-Aligned
Both point to reduce carbon emissions by 7% per year, to contain global warming below 2 degrees Celsius and possibly limit it to 1,5 degrees. However, the two indices differ with regard to the immediate CO2 reduction target, which is 30% for Climate Transition and 50% for Paris-Aligned.
In the second index, only companies that present a marked trend in the reduction of CO2 emissions are included; therefore all companies active in the coal sector are excluded and, above certain thresholds, those that produce oil, natural gas and carbon-intensive energy in general. This type of exclusion does not exist for the Climate Transition index.
On the other hand, all companies that do not comply with the environmental objectives of the European Union, those that violate social norms and those that operate in controversial sectors such as weapons and tobacco are excluded from both indices.
Investment firm Lyxor created eight Climate ETFs (four for each index) which allow exposure to the global, European, US and emerging market equity markets.
"These products make it possible to direct capital towards a precise environmental objective, i.e. the fight against climate change - explains Vincenzo Saccente, head of sales in Italy of the French company, in a video interview with Salvadenaro.it – to be achieved by a well-defined date, 2050, the year in which, on the basis of the Paris agreements, the aim is to have a world with zero net carbon emissions".
