Investing in a net zero future – 3 funds to benefit from the race to net zero?

Net zero means achieving a balance between the greenhouse gas emissions produced and those removed from the atmosphere.

As the world struggles with the urgent need to address climate change, achieving net zero requires significant efforts across sectors and industries.

The net zero transition could create 135,000-725,000 net new jobs by 2030.

This isn’t the only benefit though – on top of the ethical reasons for choosing sustainable investments, there are potential investment opportunities that could arise from this shift.

We delve into three key sectors – energy, transport, and agriculture – working to solve the climate crisis, and look at where the opportunities could be.

Investing in funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest. These funds focus on companies involved in specialised sectors, like sustainable energy. This means they can be more volatile, and their fortunes are heavily reliant on the success of one sector. Specialist funds should form just a small part of a well-diversified portfolio.

This article isn’t personal advice. If you’re not sure whether a course of action is right for you, ask for financial advice. All investments can fall as well as rise in value, so you could get back less than you invest.

Energising the energy market

Shifting from fossil fuels to renewable energy is a big part of reaching net zero. Decarbonising our energy systems will let us cut emissions in other industries.

Renewable energy technologies, like solar and wind, have grown massively in recent years. Renewables have benefited from falling costs as technologies have developed. For example, the cost of solar power has dropped 90% over the last two decades.

Almost a third of Britain’s electricity was provided by wind power during the first quarter of 2023 – overtaking gas consumption.

Investors can be part of this transition by investing in funds that focus on renewable energy companies, which develop, run, or finance renewable energy projects.

Guinness Sustainable Energy

The Guinness Sustainable Energy fund is managed by Jonathan Waghorn and Will Riley. They invest in companies in the solar, wind, hydro, geothermal, biofuels, biomass, and energy efficiency sectors.

The managers start by looking at around 250 sustainable energy companies. They look at the good ESG behaviours of these companies to help them define the future value of the company.

This might include whether the company has strong risk management and long-term planning, is allocating capital wisely, or integrating well with the communities they operate in. The fund invests in a concentrated portfolio of under 30 companies, which adds risk.

Current investments include the solar panel maker First Solar. The company’s technology reduces emissions by up to 89-98% compared with conventional energy generation. The managers think the company is pioneering new solar technology and operates a sector-leading approach to the manufacture and recycling of its solar modules.

Please note as this is an offshore fund you are not normally entitled to compensation through the UK Financial Services Compensation Scheme.

FIND OUT MORE ABOUT GUINNESS SUSTAINABLE ENERGY, INCLUDING CHARGES

GUINNESS SUSTAINABLE ENERGY KEY INVESTOR INFORMATION

Planes, trains, and automobiles – the future of sustainable transport

Transportation is a significant contributor to global greenhouse gas emissions. That makes it a vital part of the transition to net zero.

Electric vehicles (EVs) have become a key technology in decarbonising the transport sector. In fact, the UK government has committed to end the sale of new petrol and diesel vehicles by 2030. Norway is leading by example – nine in ten new cars sold are now electric or hybrid.

EV’s aren’t a perfect solution, lots of their parts come with environmental and social consequences. But they’re an important step in the journey to a lower-carbon society and one that’s likely to revolutionise the transport sector.

As the world transitions towards cleaner mobility, investors have an opportunity to capitalise on the growing demand for EVs.

Investing in funds that support EV manufacturers, battery producers, charging station providers, and public transport systems can provide an opportunity to jump on the transformative trend.

FP WHEB Sustainability

FP WHEB Sustainability aims to make a positive difference to the environment and society through the way it invests.

The team behind the fund focuses on nine sustainable investment themes. They range from resource efficiency and sustainable transport to education and wellbeing.

One of the fund’s holdings, Aptiv, specialises in the electrical architecture for EVs. Aptiv has partnered with Lyft to provide a fleet of 75 self-driving cars in Las Vegas. Self-driving vehicles hold the promise of huge improvements in vehicle safety, along with lower environmental impact.

The fund's focus towards small and medium-sized companies and flexibility to invest in emerging markets adds risk.

FIND OUT MORE ABOUT FP WHEB SUSTAINABILITY, INCLUDING CHARGES

FP WHEB SUSTAINABILITY KEY INVESTOR INFORMATION

The state of the agricultural landscape

Roughly one third of global greenhouse gas emissions originate from our food, not to mention the added impacts on forest degradation, biodiversity loss, and freshwater consumption.

Sustainable agriculture practices, like regenerative farming, precision agriculture, and organic farming, offer solutions that prioritise soil health, biodiversity conservation, and carbon sequestration.

This is becoming more important considering our global population is expected to increase to 9.7 billion people by 2050.

Investors can take advantage of this opportunity by investing in funds that support sustainable agriculture and food companies.

Barings Global Agriculture

Barings Global Agriculture aims to grow investors’ money by investing across the agricultural value chain, from harvesting crops to having the food delivered to our tables.

The fund looks for companies offering growth at a reasonable price. In other words, those with the potential to grow profits in the future, but without an expensive share price.

This includes companies like agricultural manufacturer Deere & Co, who develop battery-electric backhoes that end tailpipe emissions. They also produce a more intelligent sprayer that reduces herbicide use, which could save farmers money and time.

The fund invests in relatively few companies. This, combined with its investments in derivatives, emerging markets and smaller companies adds risk.

FIND OUT MORE ABOUT BARINGS GLOBAL AGRICULTURE, INCLUDING CHARGES

BARINGS GLOBAL AGRICULTURE KEY INVESTOR INFORMATION

For more information on how to incorporate climate-related risks and opportunities into your investment decisions, visit our responsible investment hub.

Net Zero – the companies leading the fight against climate change