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While committing to alternative energy sources requires upfront costs, companies can benefit in the long term, CIBC Asset Management’s Brian See says.

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“It’s important that companies start thinking about the transition now, as opposed to being reactive in the very long term,” said See, a vice-president and equity analyst at the bank.

The viability of oil and gas will decrease in the next 20 to 30 years, he said. “The overarching premise is to pursue cleaner and greener alternatives relative to traditional fossil fuels.”

Climate change and the shift to a low-carbon economy are top of mind for many investors, who now seek disclosure from companies on how they address these risks, reports Moody’s Investors Service.

See, who manages the CIBC Energy Fund, noted that “the world is quite aligned” on carbon reduction, with the Paris Agreement aiming to keep the rise in the global temperature this century to less than +2 C above pre-industrial levels. The agreement has been ratified by 189 countries, including Canada.

Some companies are shifting to renewable energy, including solar, wind and biofuels. For example, the utility sector used to be natural gas weighted and is changing to rely more on solar and wind, See said.

“We’re seeing companies today make certain investments in preparing for a new, greener energy future,” he said in a Feb. 20 interview.

In Canada, Suncor Energy has invested in electric-vehicle charging stations, as well as wind farms. BP, the London, U.K.–based multinational oil and gas company, has a target of net zero carbon by 2050.

To reach the goal, BP will rely on a combination of alternative fuels, carbon sequestering and  limiting the carbon footprint, See said.

Companies also respond to the carbon challenge through carbon offsetting — initiatives that avoid or reduce greenhouse gas pollution.

Yet, energy companies aren’t the only ones focused on reducing carbon emissions.

“The bulk of the emissions — 80% — is produced by end users, whether that’s coming from factories, automobiles or airplanes,” See said. Carbon is “everybody’s issue.”

In contrast, carbon produced by oil companies, specifically at the wellhead, is about 10% to 12% of overall global emissions, he said.

As consumers make changes, such as switching to electric vehicles, carbon is reduced and tech companies benefit. Changes will likely occur slowly, however, considering that the world’s two biggest economies are big users of fossil fuels.

“China and the U.S. make up about 45% of total carbon emissions, while Canada is around 2%,” See said. “Much of the world is still relying on fossil fuels, including coal, oil and natural gas.”

Further, the U.S. decision to withdraw from the Paris Agreement takes effect in November of this year.

This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.