As 2021 races to a close, it is easy to get frustrated. COP26 revealed that global emissions may be underreported, that developing countries never received the funds promised at the last global meeting, and that we don’t have a perfect planetary consensus on climate policy.
But, as Mark Carney of the UN has noted, 80% of the world’s climate solutions will need to be funded by the private sector. And for the private sector, there is good news.
BlackRock, the investment management company, estimates show that in 2020 companies with the lowest carbon emissions intensity had a 2% positive annual return, while assets with the highest carbon emissions intensity had a negative return. We are witnessing the repricing of global financial assets based on levels of carbon emissions.
And in 2021, the company is going further. BlackRock investment analyst Vivek Paul notes that the difference in returns between companies with low and high carbon emissions intensity is now statistically significant, and “… most of the repricing is still to come.”(1)
Let’s repeat that: Most of the repricing is yet to come. This means that an investor who lines up a “green” portfolio at the end of 2021 should expect to earn a higher return than an investor who does not.
So, 2021 is ending on a pretty good note! The flywheels of capitalism, which are so needed to conquer climate change over the next decade, are poised to earn a very nice return for doing good.
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