1.5 Degree Transition Challenge - Liontrust Engagement Update 11.21 - Flipbook - Page 3
Over the last 30 years, we have seen significant progress in
reducing the amount of Greenhouse gas emissions (GHG) for every
unit of growth in the global economy, with the greatest progress in
China where emissions per unit of GDP have more than halved.
For all the positive work in reducing GHG intensity, however, the
concentration of carbon dioxide in our atmosphere has increased
by more than 50% since 1760, with the decline in intensity dwarfed
by how much the global economy continues to grow. The world has
to understand that what really matters is total emissions; it is only by
reducing these that we can stabilise the concentration of GHG in
the atmosphere. This is what is driving increased temperatures and
causing the rapid pace of climate change.
A goal to limit global average temperature rises, compared to
industrial levels, to less than 2 degrees centigrade, and ideally less
than 1.5, was internationally approved in the Paris Agreement,
adopted at COP21 in Paris in December 2015 and implemented
a year later. But the seminal Intergovernmental Panel on Climate
Change (IPCC) report, published in October 2018, still shocked
many with its stark conclusion: to meet that 1.5 degree target and
stand any chance of keeping climate change manageable, we
need to halve absolute emissions by 2030, and ideally sooner.
Work done by Carbon Tracker the same year estimated that even
assuming all the global commitments on climate change are met,
we should still expect to see global average temperatures rising
Without major intervention, we should still
expect to see global average temperatures
rising to around 3-4 degrees above preindustrial levels
to around 3-4 degrees above pre-industrial levels. Meanwhile,
the IPCC’s latest report from earlier this year reiterated its earlier
findings, reporting that the evidence of observed changes in
extreme weather events (such as heatwaves, heavy precipitation,
droughts and tropical cyclones) and the cause being linked to
human activity has strengthened..
The sooner we cut emissions, the less negative impacts and costs
there will be in trying to adapt to climate change; in short, this is
an emergency.
Against this background, the Liontrust Sustainable Investment team
launched our One and a half degree Transition Challenge in early
2020. In meetings with our Advisory Committee, we had discussed
how the pace of change by companies in reducing carbon emissions
was falling well short of the level demanded by science. Our challenge
had its roots in the simple observation that small incremental annual
decarbonisation targets of 1%-2% would take many decades – 50
and 25 years respectively – to halve emissions, when the science is
telling us this needs to be achieved in less than 10.
The importance of this is not based on altruism alone. As investors,
we believe companies with credible and ambitious strategies to
decarbonise aggressively will gain a competitive advantage
over their more reactive peers and will be more successful in a
carbon constrained economy where demand for their lower carbon
products and services will be strong.
The pace of change by companies in reducing
carbon emissions is falling well short of the
level demanded by science
Decarbonisation targets of 1%-2% would
take many decades to halve emissions,
when the science is telling us this needs to
be achieved in less than 10
Falling GHG intensity versus rapidly rising emissions and climate change
Greenhouse gas emissions, per USD of GDP,
per country and region*
CO2 at Mauna Loa now reaching 50%
above the pre-industrial levels**
450
2,500
CO2 concentration
(parts per million)
2,000
1,500
1,000
50% increase
417 ppm
400
350
Pre-industrial
278 ppm
300
500
0
Russian Federation
India
Japan
Rest of World
2020
2000
1980
1960
1940
1920
1900
1860
1840
1820
1800
1780
2020
2018
2016
2014
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
250
1760
Tonnes of CO2 per USD 1,000
3,000
China
Uncertainty
United States
European Union (EU-28)
Global average
Source: *World Bank, IMF. Emissions do not include those from international transports or land-use change. **Ice core data from MacFarling Meure et al (2006), Mauna Loa data from the
Scripps CO2 program, 2021 forecast from Met Office.
Liontrust: 1.5 degree Transition Challenge – engagement update - 3
