For financial professionals in Italy

Is decarbonisation an opportunity for emerging markets?

Paul LaCoursiere, Global Head of ESG Investments, chairs a World Climate Summit Investment COP panel discussion with academic, business and government experts from across the world. They discuss opportunities and challenges that decarbonisation presents across emerging markets, with a focus on potential emission reduction and financing solutions.

Key takeaways:

  • Emerging markets are facing completely different challenges to developed countries. Many are still struggling with COVID, making it difficult to think about the transition towards a net-zero future. A fundamental issue is the need for much better financing mechanisms for emerging markets to transition to net zero.
  • While a green bond premium can exist over conventional bonds of similar characteristics — providing lower funding costs for issuers of green bonds designed to support specific climate-related or environmental projects — it has only been seen consistently in developed market sovereign green bonds, notably Germany. ­
  • Policy action in relation to fighting and financing climate change is required as a supporting and enabling mechanism, particularly for emerging markets. Governments have a clear role to play in the energy transition and, arguably, should create the required framework and strategy.
  • The energy sector is part of the climate change problem, given the dependency of many emerging markets on fossil fuels, and solution. In Chile, for example, 77% of the greenhouse gas emissions are aligned to the energy sector. However, the sector will help tackle climate change, notably via wind and solar, and bring social and economic opportunities to the country. Looking at emerging economies more broadly, where electricity systems are not well developed, the case for renewables is compelling.
  • Credible energy transition plans are required for moving from the use of high-emitting assets and switching into renewables. In certain geographies some companies are at grid disruption, which means it is cheaper to close high-emitting assets and build renewable assets in place. When divesting from high-emitting assets it is key for corporate management teams to question who they are selling the assets to? How will they run the asset? What’s their corporate governance approach? What are the environmental standards under which they are going to be effectively run?

Glossary

Leverage: The ratio of a company's loan capital (debt) to the value of its ordinary shares (equity); it can also be expressed in other ways such as net debt as a multiple of earnings, typically net debt/EBITDA (earnings before interest, tax, depreciation and amortisation). Higher leverage equates to higher debt levels.

INVEST WITH PURPOSE FOR
A BETTER TOMORROW

Paul LaCoursiere

Paul LaCoursiere

Global Head of ESG Investments


10 Nov 2021

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Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

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Marketing Communication.

 

Glossary

 

 

 

Paul LaCoursiere

Paul LaCoursiere

Global Head of ESG Investments


10 Nov 2021