Sustainable Investing - Climate Change and human activity and how investing can help slow down change
At Moneyworks we use the shorthand terminology 'Ethical Investing' to cover a range of investing styles that can also be referred to as 'Sustainable', 'Responsible', 'ESG (Environmental, Social, Governance).
One of the main things that these 'ethical' investments have in common is that they are looking for investments that are long term, that will make our planet and environment, and human lives more sustainable and last longer. There are a number of different ways that we can invest ethically/sustainably and we will be providing more information on this in the future, this article is the start of a series of some interesting information from Robeco. Robeco are a Netherlands Based investment manager, that we hope we will be able to access in New Zealand in the future (but can't at present), who have a focus on ethical investing.
We will profile these statistics and the implications over various blog posts and newsletters.
Some of the background comments from the analysis are:
Every month we found an interesting new number from the world of sustainable investing, and added our own investment angle to it. Using the same format for each one, we asked three questions: What has happened? Why is it important? What does it mean for investors?
And it truly did throw up some stunning stories that would otherwise not have seen the light of day.
Did you know, for example, that six ships create as much pollution as all the world’s traffic? That three bitcoins consume as much energy as a million credit card transactions? Or that the last time CO2 levels were as high as they are today, wooly mammoths were roaming the earth?
CO2 is at highest level (in 2017) of three million years
The amount of Carbon Dioxide in the atmosphere is now at a level last seen in prehistoric times, three million years ago.
At that time, the temperature was 2-3 degrees Celsius higher than pre-industrial levels, and the average sea level was up to 25 meters above what it is today. Humans had yet to evolve, wooly mammoths roamed the earth, and the continents were up to 250 km from their present locations, which meant North America was still connected to Asia.
Why is this important?
The findings make particularly grim reading regarding sea levels, as melting ice caps from global warming is seen as the biggest threat to modern human existence.
Rising carbon dioxide from the Pliocene onwards caused climate change which ushered in the ice ages, creating the polar caps. Reversing this would mean sea levels rising as much as 80 meters, submerging coastal cities and threatening billions of people.
The research also means that global warming is progressing at a faster pace than previously thought, making it harder to meet the conditions of the Paris Agreement. These seek to limit temperature rises to a maximum of 2 degrees above pre-industrial levels by 2100, and preferably no more than 1.5 degrees.
A report issued by the Intergovernmental Panel on Climate change in October 2018 said “the world had little chance of meeting the Paris targets unless drastic action was taken now. It said the 2-degree target would probably be reached by 2030 and that global warming of 3 degrees by the end of the century was more likely.”
IPCC Report just released into human activity and climate change
IPCC has released its latest report that unequivocally confirms (based on scientific research) that Human activity is changing the climate in unprecedented and sometimes irreversible ways, a major UN scientific report has said.
The landmark study warns of increasingly extreme heatwaves, droughts and flooding, and a key temperature limit being broken in just over a decade.
The report "is a code red for humanity", says the UN chief.
But scientists say a catastrophe can be avoided if the world acts fast.
There is hope that deep cuts in emissions of greenhouse gases could stabilise rising temperatures.
What does this mean for investors?
Investing in Renewable Energy, Sustainable Energy alternatives and companies that help combat global warning. Being aware of the carbon footprint of the investments held within the investment portfolio (where possible).
Interestingly, some of the larger renewable energy companies, that are investing in wind turbines, solar energy, biomass fuel also have legacy fossil fuel investments that they are exiting. While it is ideal to have nil or very low exposure to fossil fuels in your portfolio, it can be a catch-22, as energy companies that have previously operated in the fossil fuel industry are some of the leaders in renewable energy - for example Nexterra Energy - http://www.nexterra.ca/.
What are we doing about this at Moneyworks?
We have built a proprietary system that enables us to understand exactly where the investments that we recommend are invested (based on twice yearly declarations). We then understand the pro's and con's of these investments if they fall into the 'nasties' categories.
We are building portfolios for our clients that are fully ethical (where the investments are designed to do good for the world) and 'hybrid' (where there is strong ESG and ethical integration into the investment selection).
We analyse the investments that we recommend to make sure that they are 'true to label' and aren't greenwashing (Greenwashing is a marketing ploy companies use to make their products sound more environmentally friendly than they are. Their claims are often exaggerated, misleading and not backed up by evidence) or brownwashing - (To rebrand, cover up or divert attention from amoral, illicit or criminal activities by establishing partnerships or connections with legitimate, value-based organizations e.g. NGOs).
We are continually reviewing and tracking our recommended fund managers to make sure that their investment performance provides good returns for you and that they are 'walking the talk'.
If you want to find out more about our ethical investing approach, contact us by clicking here.