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Looking for Green Assets

Looking for Green Assets

Responsible investment

Climate change is one of the largest threats facing society today.

As highlighted by the United Nations, the impact of rising greenhouse emissions can severely disrupt economies, costing both people and communities dearly.

Getting the world to an acceptable global warming limit of 2°C by 2100 is the responsibility of governments worldwide. This goal was agreed by 195 countries at the 21st Conference of the Parties - or COP21 - to the United Nations Framework Convention on Climate Change and subsequently formalized by the Paris Agreement, in December 2015.

Investment is core to supporting the transition to a 2° world. But to achieve this, hundreds of trillions of US dollars will be required, according to estimates from various international institutions. Significantly national governmental commitments will not be sufficient to fund the transition.

At the same time, the current available green financial proceeds remain insufficient. As an example, the green bonds market, while it is rapidly growing1, has yet to reach critical mass. The need for further diversification in terms of assets, and for a broader definition of ‘greenness’ is needed now more than ever.

Thankfully policymakers are currently considering the setup of a green taxonomy – a crucial step of the European Commission’s Sustainable Finance action plan.

In this paper we want to outline our own thoughts and convictions in regards to this subject. We want to take the opportunity to explain AXA IM’s view on the definition of green asset - what we feel needs to be done to tackle the threat of climate change and how we would like to see the world of responsible investment evolve.

1According to Climate Bond Initiative (CBI), the green bond market started to take off in 2014 when USD 37 billion was issued; over three times the 2013 issuance (USD 11 billion). In 2017 issuance was almost USD 157 billion, setting yet another record.

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