Investing in the energy transition
Powering your portfolio for a greener future
Marketing Communication
As the world moves towards a more responsible future, there’s a growing opportunity to have a positive environmental effect through your investment decisions. By investing in the energy transition, you could align your financial goals with companies’ responsible endeavours to reach net-zero emissions, which may, in turn, lead to potentially attractive returns and contribute to a greener tomorrow.
The energy transition is the shift from traditional, fossil-fuel-based energy systems to responsible, low-carbon alternatives in an effort to limit global warming. According to the International Energy Agency (IEA), the energy sector accounts for around three-quarters of global greenhouse gas (GHG) emissions. Therefore, change here is key to reaching net-zero targets by 2050.1
In energy production, the primary goal is decarbonisation: reducing emissions of carbon dioxide and other GHGs. This involves phasing out fossil fuels and increasing the share of renewable energy sources, such as solar, wind, hydropower, geothermal and bioenergy.
Key trends driving the transition
Some of the key drivers of the energy transition include government policy and regulatory support, technological progress through clean electrification and the inclusion of environmental, social and governance (ESG) factors in investment decisions.
Renewable energy sources are developing rapidly. To support this growth, governments need to incentivise the adoption of renewable energy, encourage energy efficiency and support innovation in the sector. According to the IEA, to reach net zero by 2050, almost half the reductions in CO2 emissions will need to come from technologies that are still in development.2 So government intervention is vital to accelerate the advancement of these technologies.
Clean electrification – using energy derived from clean sources to create electricity – is also an important factor in reaching net zero. Progress is being made here, with wind and solar power generation now cheaper than new fossil power in countries representing over 95% of electricity generation and cheaper than existing fossil power in countries representing 60% of electricity generation.3
However, there are some sectors where direct electrification (replacing one source of energy, such as power or heat, with fossil-free electricity) may remain impossible or uneconomic for decades.4 In these instances, clean electrification can be complemented by other zero-carbon energy sources, including biomass from organic materials like plants and animals.5 For more on bioenergy, see our article here.
Investors are increasingly integrating climate-conscious considerations into their decision-making, driving capital towards companies and initiatives aligned with the energy transition. Index providers and fund managers are committing resources to responsible investing by building climate-focused portfolios and funds. Asset managers that prioritise these metrics, such as Amundi, also work closely with companies to ensure they are progressing towards their emissions goals.
How to cut your portfolio’s carbon footprint
To reduce your portfolio’s carbon footprint, consider investing in funds that prioritise net-zero ambitions. One option is to invest in exchange traded funds (ETFs) that track low-carbon indices in line with the Net zero objectives. In 2019, the European Commission launched two climate benchmarks to advance progress towards a climate-resilient economy.6
Both benchmarks prioritise decarbonisation but at differing speeds. The Paris-Aligned Benchmark (PAB) takes an accelerated approach, employing extensive screening, potentially eliminating some companies with GHG-producing activities, enabling you to reduce your portfolio’s carbon footprint by 50%. Meanwhile, the Climate-Transition Benchmark (CTB) offers broader market exposure, with a 30% reduction in GHG-producing activities compared with the investable universe.7
At Amundi ETF, we offer an extensive range of climate ETFs, covering equity and fixed income. We strive to provide investors with simple tools to implement ESG and climate strategies, making low-carbon investing accessible to everyone.
Climate-focused ETFs present a compelling opportunity to combine financial returns with positive environmental impact. By supporting the transition to a greener economy, investors can help to drive change while potentially reaping long-term rewards.
To find out more about our climate range of ETFs, just visit our website:
CLIMATE ETF RANGE
CLIMATE HUB
1, 2 IEA, Net Zero by 2050 report, p.13, p153 Energy Transitions Commission, Better, Faster, Cleaner: Securing clean energy technology supply chains report, June 2023, p.74, 5 Energy Transitions Commission, Bio resources within a Net-Zero Emissions Economy report, p. 106 ESMA Europa, Climate benchmarks and ESG disclosure7 Amundi, Climate Change ETFs
Amundi ETF Main Risks
Risk of the loss of invested capital. Investors may not get back the original amount invested and may lose all of their investment.
Risk associated with the markets to which the ETF is exposed. The price and value of investments are linked to the liquidity risk of the components. Investments can go up as well as down.
Risk associated with the volatility of the securities/currencies composing the underlying index.
The fund investment objective may only be partially reached.
Information on Amundi’s responsible investing can be found on amundietf.com and amundi.com. The investment decision must take into account all the characteristics and objectives of the Fund, as described in the relevant Prospectus. When investing in an ETF, it’s important to carefully review the fund’s prospectus. As with any investment, it’s advisable to assess your investment goals, risk tolerance and seek professional advice before making investment decisions. PLEASE NOTE THAT CAPITAL IS AT RISK. YOUR CAPITAL IS FULLY AT RISK AND YOU MAY NOT GET BACK THE AMOUNT ORIGINALLY INVESTED.
