The role of private capital in achieving the climate goal

While governments provide the policy framework needed to bring about change, innovative business models will come from the private sector.

The race for emission neutrality or the race for the “zero economy” has begun, and the world as we know it is in the midst of transformation. Countries, cities and companies have pledged to reduce greenhouse gas emissions, demonstrating that climate change is no longer the only problem for environmentalists and NGOs.

From companies that respond to shareholder inquiries to consumers who choose to buy organic products and move to a more sustainable lifestyle, raising awareness of climate change has created a new market environment. Therefore, the role of financial services in providing capital has become more important than ever to bring this transition to a clean zero economy and reduce the pressure on natural resources. In particular, direct capital will play an exceptional role in this transition.

The driving force behind climate change

As a long-time direct investment specialist, Unigestion not only acknowledges its responsibility to view climate change as a risk, but also to seek attractive funding opportunities in the climate impact sector. Climate finance financing is an operation aimed at overcoming climate change, moving society and business to a low-carbon and climate-resilient economy in line with the 1.5 ° C target. To achieve this goal, current models need to be changed, volatile resource consumption, environmental pollution and the use of fossil fuels such as coal and oil. It is important that the private sector play a crucial role in achieving this goal. While governments provide the policy framework needed to bring about change, innovative business models will come from the private sector.

At Unigestion, we have identified three important areas that emphasize the role of private capital in addressing climate and environmental issues in the market:

  1. Entrepreneurship. Structural changes in industries and technological innovations in the field of sustainable development are the result of entrepreneurial growth, which is usually based on private companies.
  2. Flexibility. Private companies have a high degree of control over decision-making processes and are more flexible in implementing changes.
  3. Innovation. Developing solutions to replace polluting technologies or environmentally harmful products requires innovative thinking, and private companies have every opportunity to innovate in business models and services.

We identify opportunities and invest in companies that provide significant solutions to climate change, ensuring that measurable productivity and impact are achieved together. To give a few examples:

The transition energy sector plays a crucial role in freeing us from dependence on fossil fuels. Renewable energy capacity still needs to grow, which is estimated to require an investment of $ 3.4 billion to reach a 55% share by 2030. Thus, we focus on players who will provide solutions to significantly reduce the carbon footprint in the energy sector.

Many of the world’s largest carmakers have begun to change their business model to electric vehicles, with global sales growing by 43% in 2020. We have been aware of the changing landscape for several years and already have experience in the electric car price industry. , which is the basis of the market for green mobility based on renewable energy.

Can return and influence go hand in hand?

We have long recognized the importance of environmental responsibility as part of our private equity strategy and believe that the following environmental factors will help to improve the effectiveness of investments that affect the climate:

  1. High demand for low carbon solutions. Environmental products / services are in high demand and have been widely adopted over time as substitutes for existing products.
  2. Pricing. Green products / services can benefit from higher price capacity and profitability.
  3. Lower financing costs. Green finances are available at a lower price for companies that offer environmental products or services.
  4. Strategic bonus. For all the reasons mentioned above, private companies offering environmentally friendly products or services will end up in high demand from investors and / or large corporations seeking to increase their commitment to sustainable development strategies.

It’s time to invest

Undoubtedly, now is the time to invest. As with many innovations in the past, such as the Internet, cellular network or GPS, government support has been important to stimulate initial growth. However, the current investment landscape has changed as consumer behavior has changed, and demand for climate solutions is expected to grow.