With the second week of COP26 underway in Glasgow, we reflect on this summer’s devastating floods, wildfires and record-breaking heat waves which vividly illustrated the destructive realities of climate change. 
While serving as an uncomfortable reminder of the urgency of tackling the climate crisis, it is vital to acknowledge the responsibility of the investment industry - not just to decarbonise portfolios through divestment but to build portfolios aligned with real-world inclusive decarbonisation.
Once-in-a-lifetime investment opportunities abound
The scale of the necessary change ahead means we have a rare and exciting opportunity to invest to support the step change needed. International Energy Agency’s (IEA) ‘net zero by 2050’ report highlights that a four-fold increase in wind, solar and renewable energy capacity is required by 2030 from today’s figures. It also states that, by 2030, the number of electric cars on the road needs to increase by 18 times and the annual battery production for electric vehicles by 41 times.
This underscores the mammoth amount of capital required, and thus the investment potential of decarbonising our global economy. The IEA estimates that the world will need to spend over $4trn annually by 2030 if we have any hope of achieving net zero by 2050 - a vast increase on the c.$700bn that’s been spent each year over the last few years.
At Ninety One, we believe this provides an exciting, long-term, potentially once-in-a-lifetime structural growth opportunity for investors allocating to companies providing climate solutions.
Willingness amongst investors
Ninety One’s recent Planetary Pulse survey, Investing for a Carbon Free World: What Investors Want, which sought the opinions of more than 6,000 individual investors across ten markets, highlights that investors around the globe support the drive to net zero.
Significantly nine out of 10 investors said they believe that reducing carbon emissions should be encouraged and are happy for their money to play a part in achieving that aim; whilst a third of global investors are so intent on helping the planet they would be happy for their money to go towards reducing carbon emissions, irrespective of whether or not they make money.
It’s not all about energy
Importantly, while the IEA report focuses only on the energy system, which accounts for about two-thirds of global carbon emissions, it is important to acknowledge the myriad investment themes beyond solar panels and wind turbines for investors looking to access the decarbonisation investment opportunity - we advocate an approach which is diverse across region and sector.
Some of our recent areas of focus have been the future of factories and the decarbonisation of buildings, as well as transportation. We see great investment potential in companies that are the solutions providers in these areas.
Can we eat our way to net zero?
The theme that is currently generating the most excitement around the desk is the future of food. With the global population set to increase to nine billion by 2050, to meet the demand associated with this number of people, food production will need to increase by 70% - and in a climate friendly manner. Almost 20% of global carbon emissions are caused by livestock farming (including feed production) and its by-products.
An area in which we have carried out extensive research is the decarbonisation of meat. We see significant potential for growth in plant- and cellular-based meat alternatives, given their diminutive carbon emissions relative to the products they are replacing within the meat supply chain. We anticipate the alternative-meat market to exceed $300bn by 2035, from just $20bn today.
We are accessing the investment opportunity through our position in Novozymes, which is a market leading biotech and specialty chemicals company, whose enzymes are key ingredients in plant-based and cellular meat and dairy alternatives, as well as improving the efficiency of a range of agricultural and household industrial processes.
Additionally, our position in Beyond Meat allows us access to the only publicly listed pure-play on the alternative-meat theme. The company sells innovative plant-based meat products domestically in the US and internationally, partnering with household names such as McDonalds and PepsiCo, which underscores its leading brand position.
While we can’t eat our way to net zero, the companies helping to reshape the way we eat and produce food can certainly have a hugely positive impact on sustainable global decarbonisation.
Global movements on climate change have put pressure on leaders to take action and address the climate crisis like never before and we sincerely hope to see more rapid and sustainable political action in the wake of COP26. The investment industry has a pivotal role to play in ensuring the flow of capital helps to solve the climate crisis in a fair and inclusive manner.
Enabling the transition to net zero isn’t only good for the planet – it will create opportunities for companies and investors alike.
Graeme Baker is co-portfolio manager of the Ninety One Global Environment fund. The views expressed above are his own and should not be taken as investment advice.