Following a disappointing Copenhagen summit, where no legally binding treaty on carbon emissions was delivered, the Climate Change sector has underperformed Global Equities according to the latest quarterly review of the HSBC Global Climate Change Index.
The lack of a global agreement on emissions reduction has led its authors to question the validity of Carbon Trading as an investable theme.
Despite a failure to deliver an ambitious legally binding agreement at Copenhagen, regional and country specific policies are shaping the pace and nature of investments, leading to pockets of both over and under performance in the Climate Change space.
Among the winners is the Energy Efficiency & Energy Management sector to which governments have pledged over 50% of global climate stimulus.
Joaquim de Lima, Global Head of Quant Research for Equities at HSBC, commented: “This is an area many countries wish to take a lead in and as a ‘no - regret’ option Energy Efficiency & Energy Management represents a win-win situation for everyone.
“It is one of the most effective means by which countries can protect and make the best use of resources while also representing the cheapest and fastest way to cut greenhouse gas emissions”.
The major loser has been the expected growth in Carbon Trading. Vijay Sumon, an index specialist at HSBC Global Research said: "A global agreement with specific hard targets would have allowed the carbon market to thrive; with none in place the general downward trend of carbon trading seen last year has accelerated. Post Copenhagen it has fallen over 28%".