Investors must help emerging markets or face 'severe climate impacts'

Nazmeera Moola told FTAdviser getting to net zero required both engaged investors and the investment community to fund providers that are enabling the transition to a low-carbon economy. And these should be funded directly in emerging markets.

She said Ninety One does not believe in divesting from heavy emitters, and she does not think this will help the global attempt to reach net zero carbon emissions.

“We are committed to working with high-emitting countries and companies to ensure they have credible transition plans,” she said.

“As investors, we think the greatest impact we can make is to support real-world emissions reductions, rather than simply creating ‘low-carbon portfolios’.”

Moola said while emerging markets currently produce 50 per cent of global emissions, they account for less than 25 per cent of the stock of emissions in the atmosphere. 

“However, by 2030, their share of total emissions is going to be 90 per cent. 

“Therefore, if the developed world does not help to tackle emerging markets’ emissions, even if it achieves net zero itself, it is going to face severe climate impacts. 

“In short, net zero for some, means no net zero at all.”

As investors, we think the greatest impact we can make is to support real-world emissions reductions, rather than simply creating ‘low-carbon portfolios’.Nazmeera Moola

The onus is on the investment community to assist this, Moola added.

Ninety One appointed Moola to the newly-created role of chief sustainability officer last month.

She is responsible for overseeing the firm’s sustainability initiatives, and was previously deputy managing director and head of South African investments at the firm.

Steps towards net zero

Moola said the first step towards net zero was for investors to recognise that emerging and developed markets will decarbonise at different speeds, and therefore must develop approaches to measuring net-zero alignment that reflect this.

“On average, the world needs to reduce emissions by about 7-8 per cent per annum. 

“While developed markets need to cut their carbon emissions by 50 per cent by 2030, for many emerging markets that figure is lower than 30 per cent under a realistic and fair decarbonisation scenario.”

The second step was for asset owners and managers to focus not on reducing their portfolio-level carbon footprints or creating portfolio purity, but on financing solutions that generate real-world reductions in emissions, she said. 

“Finally, we need innovative financial instruments that will help to channel the very substantial amount of capital required to fund emerging markets’ transition.”

Climate finance needs to be directed towards the energy sector, Moola said, given it accounts for 30-45 per cent of global emissions.

We need to incentivise utilities to retire coal plants earlier than they might on a purely economic basis.Nazmeera Moola

“Additionally, transport accounts for 60 per cent of emissions – but of course the primary solution for decarbonising transport is to switch to electric vehicles, which brings us back to decarbonising energy.”

For countries with coal-heavy energy systems like South Africa, Vietnam, the Philippines and Indonesia, Ninety One looks to finance four areas, Moola said. 

The first is clean-energy infrastructure, such as solar and wind farms, and batteries. The second is upgrading the electricity grid to integrate renewables and meet the new demands that will be placed on it, such as vehicle-charging. The third is providing adequate funding so that communities that currently depend on heavy-emitting industries – such as those in coal-mining towns – are not negatively impacted by the shift to cleaner energy. And the fourth is to incentivise utilities to retire coal plants earlier than they might on a purely economic basis. 

“It is my view that there is a need to establish new financial mechanisms for the latter especially,” she added.

sally.hickey@ft.com