Delivering on environmental objectives through net potential avoided emissions

Our analysis shows potential avoided emissions are, in fact, 5 times greater than the fund’s carbon footprint (measured in scopes 1, 2 and 3).

The research also shows that the portfolio holdings have potential revenue exposure towards several of the UN Sustainable Development Goals, thereby reflecting the climate and environmental objectives of the fund.

The report’s findings highlight a portfolio of investments for the future which are aligned with EU’s EUR750bn green recovery plan (announced in May) which emphasises that the rebuilding of the economy post-pandemic must support the green energy transition. This will revitalise the economy and secure jobs, while also guiding us towards the 1.5C target of the Paris Agreement. Delivering on this target demands a 6% annual reduction in global greenhouse gas emissions between 2020 and 2030 according to IPCC estimates.

Our fund, DNB Renewable Energy, is dedicated to investing in the solution providers to climate change. The fund invests in companies with products and services that offer reduced emissions compared to traditional sources (ie. renewable energy) or which enable emissions reductions for their customers. These benefits are often not captured by traditional carbon footprinting. We have therefore conducted additional analysis to understand the emissions that such technologies may help to avoid.

In particular, the wind and solar sectors show a strong contribution to potential avoided emissions. However, it may come as a surprise that the materials sector comes in at a close second.

The materials sector has, until now, not seen the same ESG-premium we have seen in other sectors. Due to the carbon intensity of materials production, companies within the sector have not necessarily been an obvious focus for environmentally-conscious investors. However, the materials produced by the companies we invest in are crucial for the energy transition. Moreover, the sector is central in terms of its contribution to enabling resource efficiency and the circular economy. Given that these are key elements of the EU Green Deal, and essential to delivering on climate goals, we believe that understanding companies’ contributions to these should be part of company analyses for the sector. Our investments in the materials sector exemplify how our investment process centres around finding opportunities for emissions reductions throughout the whole value chain.

The report has been prepared in close collaboration with our own ESG team as well as ISS-ESG. Strong ESG integration is central at DNB AM and contributes to enhancing the quality of our investment process and products. We believe there will be a continued focus on this moving forward.

Download the full DNB Renewable Energy Report here (PDF)

The author of this blog post, Christian Rom, manages the DNB fund Renewable Energy with his co-portfolio manager Jon Sigurdsen.

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