Climate change is one of the most important challenges the world is facing today. Green House Gas (GHG) emissions continue to increase for many countries and regions. Our planet is getting warmer.
Extreme weather events happen with higher frequency and incur higher damage costs. Urgent actions are required to mitigate the negative impacts of climate change on the global economy.
Countries and governments alike must take more ambitious actions to tackle climate change and to reach the goal of the Paris Agreement, which limits global warming to well below 2°C. We need to accelerate the transition to a low-carbon economy before it is too late.
Climate change is expected to have a significant impact on the global economy. This is the reason why we have decided at La Française to develop a climate-transition investment methodology for all assets classes. We consider that climate change is an investment risk but also a source of opportunities that will impact the value of investments in the coming years.
Until now, investors have focused primarily on climate change at the corporate level (i.e., for equities and credit) but not at the sovereign level. Countries are directly exposed to climate change risks and government bond investors can no longer ignore these risks.
In this document, we introduce our climate-transition approach to sovereign debt.