Understanding climate change
What is climate change?
According to NASA, climate change is the long-term change in the earth’s overall temperature with massive and potentially permanent ramifications. The UN say that this is the defining issue of our time and our generation.
It is caused by what is known as greenhouse gas effect when greenhouse gases - such as carbon dioxide and methane – are collected in the atmosphere and reflect the warmth back towards the earth which should have gone into space. The increased warmth being reflected back in ends up going into our oceans, our forests, causing an increase of the overall temperature that we feel every day. And that’s global warming.
What causes climate change?
Over 95% of climate scientists agree that this level of concentration of greenhouse gases that we see is a result of human activities, such as the burning of fossil fuels, oil, gas and coal. As a result, alongside many other devastating effects and impacts, over the last 20 years, 19 have been the warmest ever recorded, with that trend only continuing to be seen.
In 2015, the world came together at the 21st Conference of the Parties (COP 21) - the global climate conference in Paris - and agreed to limit global warming to “well-below” 2°C, also known as the Paris Agreement.
In order to achieve this, it’s not only about governments setting limits, but companies taking actions to aim towards what is now called net zero or carbon neutrality - which is ensuring there are no additional emissions from 2050 onwards.
What can asset managers like Fidelity do to help achieve net zero?
As an active fund manager, we take a proactive approach by engaging with the companies we invest in. For example, with oil and gas majors and users of carbon dioxide, we work very closely with them to understand the sources of emissions, consider whole life carbon with costing, and disclose annual carbon footprint, in order to help them reduce the total emissions globally. Through engagement and collaboration, we can help companies transition towards net zero, with the aim to achieve the Paris objective of global warming being “well-below” 2°C.
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