Help reduce greenhouse gases. With sustainable funds.
Increasing demand for sustainable funds can be explained not least by the growing awareness of ESG criteria. By investing in sustainable funds from the construction sector, for example, investors can help companies develop new technologies and therefore have a lasting impact on the reduction in global greenhouse gases.
Global construction sector responsible for huge carbon emissions
The threat posed by climate change and the resultant need for action are well known. Achieving the agreed climate targets by 2050 will require the transition to a low-carbon economy.
A detailed cross-border analysis of the sources of carbon emissions and breakdown of emissions by purpose and industry underline the fact that, through its use of carbon-intensive materials such as cement, steel, aluminum, and plastic, the construction sector alone produces almost the same volume of emissions as the US every year.
Of the 5.3 metric gigatons of CO2 emissions caused by the construction industry as a whole, 2.5 metric gigatons are due to the cement and concrete industry alone. That is equivalent to around 7% of total CO2 emissions or about twice as much as the total produced by the entire aviation sector.
Global construction causes almost same volume of carbon emissions as US
Sources: CIEL, Ellen MacArthur Foundation, FAO, UNFCCC, World Resources Institute, Credit Suisse
Note: Greenhouse gas emissions by country and sector in 2018; figures on plastics are for 2019. Emissions from the built environment are based on four main materials used in buildings: cement, steel, aluminum, and plastics. According to the World Resources Institute, annual global greenhouse gas emissions grew by in excess of 40% between 1990 and 2020. For illustrative purposes only.
Innovative technologies are key to a more climate-friendly construction sector
Manufacturers of construction materials are aware of the problem, and have been looking for a solution for a long time. Various options have already been examined. One technology that is market-ready permanently binds CO2 released into the atmosphere in a granulate made from demolition concrete. This enriched concrete granulate is then used to produce fresh concrete.
Achieving the climate targets by 2050 requires massive investment in technology developments, with the long-term objective of producing concrete on a carbon-neutral basis.
Awareness of ESG criteria boosts sustainable funds
Climate friendliness is a vital aspect of sustainability, and indeed regulators are increasingly taking measures designed to deliver a decarbonized economy. However, the topic of sustainability is not confined to the climate and the environment; rather, it is something that affects us across a raft of areas. Awareness of environmental, social, and governance (ESG) factors is rising, and consumers are ratcheting up the pressure by increasingly making buying decisions on the basis of sustainability criteria.
These "conscientious consumers" are giving rise to new opportunities for a transition within companies and achievement of the climate targets. Investors too have identified the opportunities offered by such companies, as reflected in the rapid growth in assets managed in line with ESG criteria.
Sustainability funds gained popularity over past decade
Sources: Swiss Sustainable Finance (SSF) and University of Zurich: Swiss Sustainable Investment Market Study 2020
Past performance is not a reliable indicator of current or future results.
Investing in sustainable funds drives innovative technologies
This in turn raises expectations that listed companies will more closely base their business models and practices on ESG standards. Furthermore, fiduciary duties are gradually adapting to include sustainable investment principles, as regulators in particular are increasingly demanding the consideration of ESG criteria.
Benefits for investors include more protection against prominent governance incidents, resilient ESG performance, along with the soft factor of doing good. Investors wishing to support a sustainable recovery should invest in companies that are focused on innovative and transformative technologies.
