Net-zero investing: Searching for returns

Net-zero investing is becoming a crucial focus for the financial sector as global initiatives intensify to achieve net-zero emissions by 2050. The urgency to realign investment strategies towards financing reduced emissions and securing real-world impacts has never been more critical. In a recent interview with CNBC Africa, Daisy Streatfeild, Sustainability Director at NinetyOne, shared her views on the current state of net-zero investing and the challenges investors are facing. Streatfeild expressed concerns that despite the significant commitments from investors, asset owners, and asset managers to achieve net-zero emissions by 2050, the real-world emissions curve is not bending as expected. She highlighted a key issue with the current approach to measuring alignment to net-zero, emphasizing that focusing solely on financed emissions associated with assets does not necessarily reflect how much investors are contributing to reducing emissions in the real economy. Streatfeild stressed the importance of measuring the real impact investors are having, rather than just looking at emissions attached to portfolios. She emphasized the need for a shift towards investing in emerging markets to address the growing emissions from these regions. Streatfeild pointed out that while emissions in developed countries are stabilizing or decreasing due to offshoring high-emitting industries to emerging markets, investors need to focus on supporting the transition to net-zero in these economies. She highlighted the importance of providing investment to support economic development in emerging markets while addressing emissions. Streatfeild underscored the need for new approaches to investment that increase capital available to emerging markets and facilitate the transition to net-zero. One key strategy she mentioned was engaging with high-emitting companies in emerging markets to drive emissions reductions and support real-world impact. Streatfeild also discussed the importance of constructing portfolios that strategically allocate capital to companies with ambitious net-zero transition plans and opportunities for emissions reductions. She emphasized the significance of investing in companies that require capital to transition, rather than divesting from high-emitting sectors, to achieve real impact in emissions reduction. Streatfeild highlighted the importance of identifying opportunities for impact across different asset classes, including private markets, where investors can have a more direct influence on companies' strategies towards net-zero. She emphasized the need for investors to optimize their portfolios for both returns and impact, suggesting dedicated allocations to climate solutions and companies with robust transition plans as effective strategies. Streatfeild emphasized the importance of creatively thinking about investment strategies to maximize both return potential and impact in the transition to net-zero. Overall, the interview provided valuable insights into the challenges and strategies associated with net-zero investing, highlighting the need for a holistic approach that considers both financial returns and real-world impact.