Green Investing: How to Align Your Portfolio With the Paris Agreement
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Green Investing: How to Align Your Portfolio With the Paris Agreement

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The following content is sponsored by MSCI.


Green Investing: The Paris Agreement and Your Portfolio

In Part 1 of the Paris Agreement series, we showed that the world is on track for 3.5 degrees Celsius global warming by 2100—far from the 1.5 degree goal. We also explained what could happen if the signing nations fall short, including annual economic losses of up to $400 billion in the United States.

How can you act on this information to implement a green investing strategy? This graphic from MSCI is part 2 of the series, and it explains how investors can align their investment portfolios with the Paris Agreement.

Alignment Through Indexing

When investors are building a portfolio, they typically choose to align their portfolio with benchmark indexes. For example, investors looking to build a global equity portfolio could align with the MSCI All Country World Index.

The same principle applies for climate-minded investors, who can benchmark against MSCI’s Climate Paris Aligned Indexes. These indexes are designed to reduce risk exposure and capture green investing opportunities using 4 main objectives.

1.5 Degree Alignment

The key element is determining if a company is aligned with 1.5 degree warming compared to pre-industrial levels. To accomplish this, data is collected on company climate targets, emissions data, and estimates of current and future green revenues. Then, the indexes include companies with a 10% year-on-year decarbonization rate to drive temperature alignment.

Green Opportunity

Environmentally-friendly companies may have promising potential. For instance, the global clean technology market is expected to grow from $285 billion in 2020 to $453 billion in 2027. The MSCI Climate Paris Aligned Indexes shift the weight of their constituents from “brown” companies that cause environmental damage to “green” companies providing sustainable solutions.

Transition Risk

Some companies are poorly positioned for the transition to a green economy, such as oil & gas businesses in the energy sector. In fact, a third of the current value of big oil & gas companies could evaporate if 1.5 degree alignment is aggressively pursued. To help manage this risk, the indexes aim to underweight high carbon emitters and lower their fossil fuel exposure.

Physical Risk

Climate change is causing more frequent and severe weather events such as flooding, droughts and storms. For example, direct damage from climate disasters has cost $1.3 trillion over the last decade. MSCI’s Climate Paris Aligned Indexes aim to reduce physical risks by at least 50% compared to traditional indexes by reducing exposure in high-risk regions.

Together, these four considerations support a net zero strategy, where all emissions produced are in balance with those taken out of the atmosphere.

Green Investing in Practice

Climate change is one of the top themes that investors would like to include in their portfolios. As investors work to build portfolios and measure performance, these sustainable indexes can serve as a critical reference point.

Available for both equity and fixed income portfolios, the MSCI Climate Paris Aligned Indexes are a transparent way to implement a green investing strategy.

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Smashing Atoms: The History of Uranium and Nuclear Power

Nuclear power is among the world’s cleanest sources of energy, but how did uranium and nuclear power come to be?

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The History of Uranium and Nuclear Power

Uranium has been around for millennia, but we only recently began to understand its unique properties.

Today, the radioactive metal fuels hundreds of nuclear reactors, enabling carbon-free energy generation across the globe. But how did uranium and nuclear power come to be?

The above infographic from the Sprott Physical Uranium Trust outlines the history of nuclear energy and highlights the role of uranium in producing clean energy.

From Discovery to Fission: Uncovering Uranium

Just like all matter, the history of uranium and nuclear energy can be traced back to the atom.

Martin Klaproth, a German chemist, first discovered uranium in 1789 by extracting it from a mineral called “pitchblende”. He named uranium after the then newly discovered planet, Uranus. But the history of nuclear power really began in 1895 when German engineer Wilhelm Röntgen discovered X-rays and radiation, kicking off a series of experiments and discoveries—including that of radioactivity.

In 1905, Albert Einstein set the stage for nuclear power with his famous theory relating mass and energy, E = mc2. Roughly 35 years later, Otto Hahn and Fritz Strassman confirmed his theory by firing neutrons into uranium atoms, which yielded elements lighter than uranium. According to Einstein’s theory, the mass lost during the reaction changed into energy. This demonstrated that fission—the splitting of one atom into lighter elements—had occurred.

“Nuclear energy is incomparably greater than the molecular energy which we use today.”

—Winston Churchill, 1955.

Following the discovery of fission, scientists worked to develop a self-sustaining nuclear chain reaction. In 1939, a team of French scientists led by Frédéric Joliot-Curie demonstrated that fission can cause a chain reaction and filed the first patent on nuclear reactors.

Later in 1942, a group of scientists led by Enrico Fermi and Leo Szilard set off the first nuclear chain reaction through the Chicago Pile-1. Interestingly, they built this makeshift reactor using graphite bricks on an abandoned squash court in the University of Chicago.

These experiments proved that uranium could produce energy through fission. However, the first peaceful use of nuclear fission did not come until 1951, when Experimental Breeder Reactor I (EBR-1) in Idaho generated the first electricity sourced from nuclear power.

The Power of the Atom: Nuclear Power and Clean Energy

Nuclear reactors harness uranium’s properties to generate energy without any greenhouse gas emissions. While uranium’s radioactivity makes it unique, it has three other properties that stand out:

  • Material Density: Uranium has a density of 19.1g/cm3, making it one of the densest metals on Earth. For reference, it is nearly as heavy (and dense) as gold.
  • Abundance: At 2.8 parts per million, uranium is approximately 700 times more abundant than gold, and 37 times more abundant than silver.
  • Energy Density: Uranium is extremely energy-dense. A one-inch tall uranium pellet contains the same amount of energy as 120 gallons of oil.

Thanks to its high energy density, the use of uranium fuel makes nuclear power more efficient than other energy sources. This includes renewables like wind and solar, which typically require much more land (and more units) to generate the same amount of electricity as a single nuclear reactor.

But nuclear power offers more than just a smaller land footprint. It’s also one of the cleanest and most reliable energy sources available today, poised to play a major role in the energy transition.

The Future of Uranium and Nuclear Power

Although nuclear power is often left out of the clean energy conversation, the ongoing energy crisis has brought it back into focus.

Several countries are going nuclear in a bid to reduce reliance on fossil fuels while building reliable energy grids. For example, nuclear power is expected to play a prominent role in the UK’s plan to reach net-zero carbon emissions by 2050. Furthermore, Japan recently approved restarts at three of its nuclear reactors after initially phasing out nuclear power following the Fukushima accident.

The resurgence of nuclear power, in addition to reactors that are already under construction, will likely lead to higher demand for uranium—especially as the world embraces clean energy.

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Showcasing the Strength of Canadian Gold Mining

Canadian gold mining has grown to become a highly prolific industry, thanks to its geological riches and political stability.

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Showcasing the Strength of Canadian Gold Mining

Gold mining has long played an integral role in shaping Canada’s cities and its modern day economy. The gold mining infrastructure that was built alongside the country’s towns in the 19th century has grown to provide $21.6 billion worth of exports for Canada in 2020.

When combined with the country’s superb geology, Canada’s jurisdictional strengths make it one of the most prolific and secure locations in the world for mining companies to explore, develop, and produce gold.

This infographic sponsored by Clarity Gold dives into how Canada has grown into a nation built for gold mining. Both in how the country facilitates the production of gold, and how the gold mining industry supports Canada’s economy and local communities.

Canada’s Golden Geology and Production

Gold is scattered across the Canadian landscape in a variety of gold mining regions and districts, with the most prolific located between Ontario and Québec.

The 2 billion year-old Archean greenstone belt that arcs through the centre of the Canadian shield provides the foundation for the Abitibi gold belt, which has produced more than 190Moz of gold.

Gold Mining District/RegionProvinces/TerritoriesGold Produced (million troy ounces)
Abitibi Greenstone BeltOntario and Québec>190Moz
Trans-Hudson CorridorSaskatchewan and Manitoba>40Moz
Red LakeOntario>30Moz
Golden TriangleBritish Columbia>5Moz

Source: Resource World

The Trans-Hudson corridor in Saskatchewan and Manitoba has produced more than 40Moz of gold, while the Red Lake mining district of eastern Ontario and the Golden Triangle in British Columbia have delivered >30Moz and >5Moz respectively.

Last year, Canada’s top 10 mines produced 3.26 million ounces of gold combined, equating to more than $6 billion worth of the yellow precious metal.

MineProvince/TerritoryPrimary Owner/Operator2020 Gold Production (thousand troy ounces)
Canadian MalarticQuébecYamana/Agnico Eagle569Koz
Detour LakeOntarioKirkland Lake517Koz
LaRonde (incl. LZ5)QuébecAgnico Eagle350Koz
BrucejackBritish ColumbiaPretium348Koz
PorcupineOntarioNewmont319Koz
MeliadineNunavutAgnico Eagle312Koz
Rainy RiverOntarioNew Gold229Koz
HemloOntarioBarrick Gold223Koz
MeadowbankNunavutAgnico Eagle209Koz
MacassaOntarioKirkland Lake183Koz

Source: Kitco

Ontario and Québec are the powerhouse provinces of Canadian gold production, hosting 30 mines between the two provinces.

A Nation Built for Gold Mining

Canada’s politically secure nature and established permitting process has resulted in five of the 10 largest gold mining companies having projects in Canada. Three Canadian provinces (Saskatchewan, Québec, and Newfoundland & Labrador) are among the world’s 10 most attractive mining investment jurisdictions according to the Fraser Institute’s 2020 survey of mining companies.

Beyond the legal and permitting strengths of the nation, Canada’s extensive network of capital markets has enabled the Canadian companies to dominate the world’s gold mining industry. With Agnico Eagle and Kirkland Lake’s upcoming merger, three of the world’s top five gold mining companies will be headquartered in Canada.

The Canadian equity markets are a key driver of the world’s gold exploration and development funding, with the TSX having raised $7.5 billion in mining equity capital in 2020. Gold still remains the major driver of these money flows, with gold mining companies making up more than half of Canada’s mining exploration budget.

How Gold Mining Gives Back to Canada

Ever since the first discoveries of gold across Canada in the 1800s, the development and production of gold mines has been the foundation for many towns and merchants across the nation.

Today, Canada’s mining industry directly employs more than 392,000 Canadians, with the sector offering the highest average annual industrial rate of pay in the country at $123,000. The industry is also proportionally the largest private sector employer of Indigenous peoples in Canada.

From the nation’s prolific gold deposits to its network of funding through robust public markets for mining equities, gold mining has grown into one of Canada’s most important strengths. The discovery, development, and production of the precious metal will remain an essential pillar of Canada’s economy.

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