Investors urgently need greater access to diversified investment strategies aligned with the Paris Agreement on climate change if the world is to avoid temperature rises well above 1.5 degrees Celsius, Tabula warns.
The first UN stocktake on progress made by countries that have made pledges to cut carbon emissions shows that most are not on course to reach net zero by 2050 and are in need of trillions of dollars in both public and private capital to achieve the green transition, the firm says.
Tabula writes that it wants to emphasise the necessity for more specialist funds directing capital towards renewables, infrastructure, energy efficiency and carbon capture. In addition, investors need diversified strategies suitable for broad, core allocations.
The Paris-aligned benchmarks (PABs), introduced as part of the EU Green Deal, help investors avoid greenwashing, and align with Paris Agreement target to keep global warming at 1.5 degrees Celsius or below.
To qualify for inclusion on PABs, an index must meet specific greenhouse gas emission targets. Additionally, it must include screening processes ensuring investments do not reach the most harmful industries.
Paris-aligned ETFs offer investors an opportunity to align their broad bond portfolios with the goals of the Paris Agreement, the firm says, thereby addressing the growing need for transparent and clear climate-friendly solutions.
Jason Smith, Chief Investment Officer at Tabula, says: “The world requires an annual investment redirection of USD2.7 trillion to achieve the net-zero 2050 ambition for climate transition. Investors desperately need ways to allocate their capital to projects that genuinely support the green transition while offering attractive returns. Paris-aligned ETFs avoid the companies most harmful to the planet while maintaining liquidity and diversification.”
Tabula CEO, Michael John Lytle says: “Tabula’s PAB ETFs cover a growing share of the fixed income market, from ultrashort to broad spectrum investment grade, high yield and fallen angels thereby offering convenient tools for investors looking to shift traditional passive allocations into more climate-friendly investments.”
