Category: Impact Investing

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ESG and the Commons: From Tragedy to Governance? (Financial Times and CFA Institute)

https://www.ft.com/paidpost/cfa-institute/esg-and-the-commons-from-tragedy-to-governance.html

“A resource arrangement that works in practice can work in theory.” — Elinor Ostrom

Sustainable investing will become the rule and no longer the exception. But this transition comes amid a disquieting change in how we must view capital, production, and their attendant effects.

Promoting the Common Good or Promoting Destruction?

In Adam Smith’s The Wealth of Nations, the pursuit of individual goals brings about — on balance — the right outcomes on a broad community scale. Think of the baker baking bread for profit: The act itself — the supplying of bread — clearly promotes the common good, even if the common good wasn’t the original intent. This, of course, underestimates the role of “externalities” in economics, or how self-interest can lead to the eventual and total destruction of certain resources. As Garrett Hardin wrote in his seminal “The Tragedy of the Commons”:

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Sustainable Investment Skeptics are Becoming Believers (Chief Investment Officer)

Study finds number of  cynics about ESG  cut in half since 2017.

The doubters of sustainable investing are rapidly dwindling in numbers, according to a study by asset manager Schroders, which found that cynics of the sector have fallen by nearly 50% in just three years.

According to Schroders’ Institutional Investor Study 2019, the proportion of investors worldwide who do not believe in environmental, social, and governance investing has fallen to 11% this year from 20% in 2017. It also said that the decline was most notable in Latin America, where the percentage of skeptics fell to 12% from 29% in 2017.

https://www.ai-cio.com/news/sustainable-investment-skeptics-becoming-believers/

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UN Climate Summit: Asset owners commit to carbon neutral portfolios by 2050 (IPE)

https://www.ipe.com/news/esg/un-climate-summit-asset-owners-commit-to-carbon-neutral-portfolios-by-2050/10033434.article

Nordic pension investors have committed to carbon neutral portfolios by 2050 as part of a new asset owner campaign.

Members of the alliance will set and publicly report on intermediate targets “in line with Article 4.9 of the Paris Agreement”, thereby holding themselves publicly accountable, according to a statement about the new initiative.

A spokeswoman said this meant the investors would be setting targets for the same points in time as countries will under the accord.

“The idea is that investors and countries can influence each other towards higher levels of ambition as they set such targets, especially when they set them in synchronicity, and when they proceed in lock-step,” she added.

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What’s Behind the World’s Biggest Climate Victory? Capitalism (Bloomberg)

https://www.bloomberg.com/graphics/2019-can-renewable-energy-power-the-world/

The chief executive of the world’s largest private coal company sat before a group of U.S. lawmakers who wanted to know whether the fuel had a future. He didn’t hesitate. “Coal,” he said, “is the future.”

Not quite. This April, for the first time ever, renewable energy supplied more power to America’s grid than coal—the clearest sign yet that solar and wind can now go head-to-head with fossil fuels. In two-thirds of the world, they’ve become the cheapest forms of power.

Solar and wind will power half the globe by 2050, based on BloombergNEF forecasts. By that time, coal and nuclear will have all but disappeared in the U.S., forced out by cheaper renewables and natural gas.

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JPMorgan Says Shipping Loans Will Go Only to Clean Vessels (WSJ)

https://www.wsj.com/articles/j-p-morgan-says-shipping-loans-will-go-only-to-clean-vessels-11568139086

J.P. Morgan Asset Management is joining a chorus of global financiers saying that protecting the environment will be a key consideration for extending shipping loans.

“There is not an institutional investor today in the Western world that is not thinking about the impact of environmental, social and governance factors,” Andy Dacy, the chief executive of the finance firm’s global transportation group, told a meeting at the International Shipping Week here.

“Anyone looking for [shipping] capital, if you’re not employing such a strategy, it’s going to be increasingly very difficult to get capital.” Mr. Dacy said. 

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Here’s a question you should ask about every climate change plan (Bill Gates)

https://www.gatesnotes.com/Energy/A-question-to-ask-about-every-climate-plan

I get to learn about lots of different plans for dealing with climate change. It’s part of my job—climate change is the focus of my work with the investment fund Breakthrough Energy Ventures—but it’s just as likely to come up over dinner with friends or at a backyard barbecue. (In Seattle, we get outside as often as we can during the summer, since we know how often it’ll be raining once fall comes.)

Whenever I hear an idea for what we can do to keep global warming in check—whether it’s over a conference table or a cheeseburger—I always ask this question: “What’s your plan for steel?”

I know it sounds like an odd thing to say, but it opens the door to an important subject that deserves a lot more attention in any conversation about climate change. Making steel and other materials—such as cement, plastic, glass, aluminum, and paper—is the third biggest contributor of greenhouse gases, behind agriculture and making electricity. It’s responsible for a fifth of all emissions. And these emissions will be some of the hardest to get rid of: these materials are everywhere in our lives, and we don’t yet have any proven breakthroughs that will give us affordable zero-carbon versions of them. If we’re going to get to zero carbon emissions overall, we have a lot of inventing to do.

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Debatable, Yet Undeniable —Taking Responsibility for Climate Change (SAGE Advisory)

https://www.sageadvisory.com/debatable-yet-undeniable-taking-responsibility-for-climate-change/

People can curb climate change and mitigate environmental pollution by voting with their money and investing in companies that have policies in place to limit such negative activities.

Although it has long been debated as to what extent humans are contributing to climate change and our ability to adapt, what is undeniable is the fact that the earth is getting warmer. The current warming cycle is occurring twice as fast in the Arctic than anywhere else on earth, and it is causing significant changes in the extent, duration, and conditions of sea ice. The loss of sea ice around the Svalbard, an archipelago in the Norwegian Sea, is predicted by scientists to be particularly profound in the coming decades.

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Real Estate Investors Need to Prepare (Bloomberg)

https://news.bloombergenvironment.com/environment-and-energy/insight-real-estate-investors-need-to-prepare-for-climate-change-before-its-too-late?utm_source=rss&utm_medium=NEVE&utm_campaign=0000016b-e204-d379-a17b-e22e9d750001

The impacts of climate change, including rising seas and extreme weather events, are quickly emerging as formidable challenges for the real estate industry and our cities.

Moody’s recently warned cities to take steps to prepare for climate change or face downgrades in their bond ratings. Last year, the International Association of Insurance Supervisors and the U.N.-backed Sustainable Insurance Forum outlineduniversal standards for how insurers should account for climate risks.

Neither of these actions should be surprising, because the consequences of climate change are only growing costlier. Natural disasters caused a record $300 billion in damage in the U.S. in 2017, most of it to real estate.