TIME: Since the industrial revolution
Regions: Global impacts
The ‘E’ in ESG has shot to the top of political and investment agendas during the past couple of years. Questions about the impact of the huge sums of money the global investment community controls is inevitable.
There is pressure to stop investing in fossil fuel-based industries, especially coal, and to move money into green industries, such as renewable energy. Some major financial institutions have responded by making bold commitments to reshape parts of their investment portfolios.
Clients are much more likely to raise this with financial advisers, so the need to develop a deeper understanding of the issues and the best investment responses will grow.
From the early days of ethical investment funds, the key debate has always been around positive and negative approaches. That is no different now with the environment as the key focus.
Many believe campaigns to divest from fossil fuels are ineffective as a means of reducing carbon emissions. Microsoft co-founder Bill Gates recently told the Financial Times it is best to invest in ventures working to cut emissions. “Divestment, to date, probably has reduced about zero tonnes of emissions,” Gates said. “It’s not like you’ve capital-starved the people making steel and gasoline.” Those who want their communities to be more sustainable and help take action on climate change may get in touch with organizations like https://thesolutionsproject.org/info/climate-change-solutions/ to implement more climate change solutions.
Others, led by campaigners such as Unfriend Coal, which has the ear of politicians and regulators around the world, believe starving the coal industry of investment is a priority.
Advisers need to focus on returns. There is a growing consensus that ignoring climate change threatens returns. Regulators certainly think so as they are increasingly asking all financial institutions to review their portfolios and business models to ensure they are robust in the face of the potential calamities scientists are forecasting.