A determined effort by both the public and private sectors to bring about a significant reduction in greenhouse gas emissions in the decade to 2030 also offers the potential for significant capital growth in equities. This new era of climate transition, when paired with discerning and forward-looking equity investment, presents opportunities for generating significant alpha.
Governments and companies are taking concrete steps to avoid the worst climate impacts by achieving net zero emissions1 by 2050. Approximately 70% of the global economy is now covered by net zero targets.2
The implications for investors are clear: climate transition planning and competency will become key areas of differentiation for companies — and key drivers for the valuation of all equities. In this shifting climate landscape there will be re-ratings, valuation dislocations and corporate winners and losers, which creates an environment ripe for active stock-picking.
State Street's Fundamental Growth & Core Equity team has developed climate-related strategies which will aim to generate long-term capital growth through investment in equity securities which contribute directly towards climate change mitigation and/or are leaders in their respective industries regarding climate change preparedness with credible transition plans.
1Net zero means that carbon emissions are either eliminated or offset.
2United Nations (2021).