From the Food in our Fridge to Heating our Homes: How We Can be Part of the Clean Economy

Original content: AXA IM

The threat of climate change has never been greater. Growing populations – and their increasing wealth – are putting greater pressure on the earth’s natural resources, by increasing demand for energy, transportation, food, water and more. As governments set net zero targets to tackle climate change to transition to a low carbon economy, there is a need for innovative solutions to reduce greenhouse gases and cut pressure on scarce resources.

The Intergovernmental Panel on Climate Change (IPCC) Special Report on global warming, published in August, predicts that temperatures could reach 1.5°C above pre-industrial levels as soon as 2030 – which increases risks to health, livelihoods, food security, water supply, economic growth and more1. The IPCC acknowledged the need to transition from fossil-based fuel reliance towards greener, renewable alternatives. The report marked a significant milestone as the first scientific study on climate change since 2013, solidifying the importance of addressing the climate transition.

In the race to net zero, we have a responsibility as individuals to help protect our planet – and as investors, we have a clear role to play. By directing capital towards companies whose products and services support the energy transition or reduce global greenhouse emissions, we can play a key part in fighting climate change and at the same time, potentially benefit from the returns generated by companies at the forefront of the clean economy.

Here are a few of the ways that we can be part of this important megatrend, both as a consumer and an investor.

Heating your home

Nearly two thirds, at 64%, of household energy consumption in the European Union in 2019 went on heating homes2. That’s significant given that according to one study, we spend on average 90% of our time indoors.3 From having a smart meter to monitor your energy usage, to choosing a provider that generates power using renewable resources, there are several steps you can take to heat your home in a more environmentally friendly way - and save money. Energy providers which we believe are making great strides in the renewables space include NextEra and Iberdrola.

On your breakfast table

Around a third of the food that is produced globally is lost or wasted each year.4 This is a huge problem globally, and one that requires efforts across government policy, corporates and consumer behaviour. One example of a company making inroads into this issue is Christian Hansen, which provides solutions for extending the shelf life of dairy products.

Agriculture is causing more damage to oceans than plastic – the cost of excess fertilizer run-off into the oceans is estimated at between $200bn and $800bn annually5. Precision agriculture companies like John Deere can enable more crops to be grown using less water and fewer chemicals – kinder to the environment and improving harvests such as the wheat used in your cereals.

Household waste and out and about

Up to 50 million tonnes of electronic and electrical waste is created every year6, but companies like Waste Connections can help people to recycle their old computers, televisions and more.

In addition, by 2030, a third of global car sales are expected to be electric vehicles (EVs)7. Choosing to purchase an EV instead of a petrol or diesel one is a way of helping combat climate change and this is a growing area of interest for investors, whether it is vehicle manufacturers like Tesla or EV components like Aptiv and battery producers like LG Chem.

Leisure time

Companies operating leisure and entertainment facilities are increasingly looking at how they can make their premises more sustainable. For example, thanks to Alfen, The Hague football stadium in the Netherlands can generate its own energy from solar panels, which is then stored during the day to light the stadium at night. The energy also powers EV chargers for the cars the spectators use to travel there8.

Sports fans who have something to eat and drink while they watch the match can also make positive changes that help the environment. Certain foods such as beef have a much higher carbon footprint than other plant-based alternatives9. US food company Beyond Meat commissioned a study that found its plant-based burger generated 90% less greenhouse gas emissions than a quarter pound of beef10.

And those French fries? Darling Ingredients is a US company that collects used cooking oil from restaurants and turns it into biofuel that can be used in the aviation sector.

When it comes to soft drinks, choosing an aluminium can rather than a plastic bottle can be much better for the environment as they are 100% - and infinitely – recyclable11. Some 320 billion drinks cans are sold globally each year12 - and more than 100 million cans are recycled in the US every minute, according to Ball Corp13, one of the market leaders in sustainable packaging.

New areas of potential

As investors, we have identified many attractive potential investment opportunities in companies operating across the clean economy. Consumers are swiftly changing their consumption habits and are playing a more active role in reducing greenhouse gas emissions – from the provenance of ingredients and raw materials to the environmental impact of finished products and packaging. Meanwhile governments and corporates are increasingly committed to net zero targets, and are investing accordingly, seeking clean energy, storage and energy efficiency services. In addition to existing consumer trends and cost-effective technologies, we believe this represents an opportunity for investors in the clean economy.

Sources

[1] Global Warming of 1.5 ºC — (ipcc.ch)

[2] Energy consumption in households - Statistics Explained (europa.eu)

[3] Indoor Air Quality | US EPA

[4] http://www.fao.org/food-loss-and-food-waste/flw-data

[5] BofAM, Climate Change January 2020

[6] UN report: Time to seize opportunity, tackle challenge of e-waste (unep.org)

[7] BNEF, 2020

[8] Energy storage makes The Hague football stadium self-sustainable | Alfen

[9] https://interactive.carbonbrief.org/what-is-the-climate-impact-of-eating-meat-and-dairy/

[10] Beyond Meat's Beyond Burger Life Cycle Assessment: A detailed comparison between a plant-based and an animal-based protein source | Center for Sustainable Systems (umich.edu)

[11] Ball - Beverage Cans

[12] BofAM Climate Change, January 2020

[13] 2015 Ball Sustainability Infographic US copy

*All stock/company examples are for explanatory/illustrative purposes only. They should not be viewed as investment advice or a recommendation from AXA IM.

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