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How can DC investors play an active and more meaningful role in decarbonisation by investing in the resources sector?
Dave Whitehair, Director of Institutional Business, DC and Tal Lomnitzer, Senior Portfolio Manager on the Global Natural Resources Team, discuss why DC savers may want to adopt a ‘blended approach’ approach that mixes investments in responsible resources with other low-carbon equity investments.
28 Sep 2023
7 minute read
7 minute read
Key takeaways:
- Annual demand for critical minerals to support decarbonisation initiatives is set to nearly quadruple by 2040, according to the International Energy Agency.
- Mining companies have yet to materially lift investment in new capacity despite the anticipated rise in demand.
- Investors can still achieve significant decarbonisation by blending investment in best-in-class sustainable resources firms within a Paris Agreement-aligned portfolio.
The ongoing drive to lower the carbon profile of portfolios – with low carbon-tilted indices or Paris-aligned benchmarks – means many equity portfolios are now underweight the resources sector at a time when the sector’s capital needs are set to surge to meet the demands of the low-carbon economy. Both Paris-aligned and low-carbon approaches to equity investing have significantly less resources exposure than passive index tracking, with investors following the former strategy committing to having no energy investments and about half the materials exposure. The acceptance of a slightly higher carbon profile with the potential for better returns could be a better outcome for DC beneficiaries than simply investing in a low-carbon portfolio that makes them feel good.
JHI
28 Sep 2023
7 minute read
7 minute read
Key takeaways:
- Annual demand for critical minerals to support decarbonisation initiatives is set to nearly quadruple by 2040, according to the International Energy Agency.
- Mining companies have yet to materially lift investment in new capacity despite the anticipated rise in demand.
- Investors can still achieve significant decarbonisation by blending investment in best-in-class sustainable resources firms within a Paris Agreement-aligned portfolio.