High-carbon emitting ‘brown' industries are often excluded from sustainable finance markets; yet these industries can often produce a lion's share of potential for CO2 emission reductions.
However, some asset managers still rule out certain sectors from the outset because they are focused on the Paris aligned benchmarks.
"This is not the approach we are pursuing because we want to achieve a positive impact. This means we must consider sectors and companies which produce high carbon emissions because they have the most potential to improve and the highest investment need to pursue this improvement," says Nikko Asset Management's Holger Mertens, speaking on Investment Talks, Green Bonds.
"A lot of these industries are quite mature, and they're traditionally financed by debt. We think green bonds are going to play a significant role in transitioning that level of infrastructure and capital over to more sustainable methods," says Mertens.
Investing in brown industries could have a significant impact in helping them transition from being climate negative to being climate positive. Tax incentives, such as the Inflation Reduction Act in the US, could also have a large impact by helping these traditional brown industries re-adjust.
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