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HOW WE CAN HELP YOU

A trusted source enabling better climate related investment choices and more positive and focused engagement

Simple fact - better informed asset owners and investors can make better and more meaningful climate related investment decisions.

 

Investing in the climate change transitions can seem incredibly complex. Yes, the challenges are massive, but on the other hand the technologies seem to promise much. Companies and politicians can make it all sound so easy. Our solutions are pain free, just pay this subsidy or tweak this regulation. No one needs to change their behaviour & the cost will be "affordable". And the ESG data providers all tell you that their data set gives you all the information you need to make the right choices.

The reality is much more challenging. Not all technologies will succeed, many incumbent industries will lobby for systems that actually prevent or delay change, the transition alternatives will all involve costs, compromises, and difficult trade offs. Society will only change gradually, and perhaps most importantly, its hard to know in advance which solutions will be financially viable. Yes, as investors, we deal with uncertainty all the time. But this time the choices we make will end up changing whole industries, often very dramatically. And this change could be rapid. In technical investing speak, this could mean that future beta/market returns, could be much lower than we have got used to - as a dis-orderly climate transition potentially destroys large parts of our economy.  

The closest modern parallel we have is the impact of the internet. Think back to before Google, Amazon and Facebook. Since then whole swathes of media and retail have been changed forever. The impact of climate change will be similar. And its not just renewable electricity, its transport, agriculture, the food we eat, how we build and heat/cool our cities, and how we use energy to power our industries. 

How then can we make sense of the complexity. We start with how the necessary transitions will actually progress. Not at a high level, not in some sort of catchy phrase that politicians and the media can latch on to,  but down in the practical detail. What social, political & regulatory factors will actually create the momentum. After all its about people, as consumers, voters and investors. What technologies could work, what trade-offs and compromises do we need to make. How long will it take, and we mean really take, not some advanced form of optimistic green wishing  And don't forget the finance. One lesson I learnt very early on is "if a business doesn't have a pathway to profitability, its probably going to eventually fail". 

We call this process setting out the transition pathways - how do we get from where we are now to where we need to be. What technological, social and financial changes do we need to occur ? What societal problem or want are we hoping to solve, who will pay and who will benefit. What might it mean to industry structures (the winners and the losers) and supply chains. Where will future competitive advantage come from.

 

This gives you the context, and the key factors you really need to watch and think about. Then and only then can you work out where you want to invest. Think of this as your long term investing strategy. The longer your investing time horizon is, the more important this strategy becomes. 

Once you have your strategy, overlay it with your filter, watching for the news flow that matters, that really tells you something about the future. Your filter must be discriminating and ignore the "noise", and believe me there will be a lot of noise. 

Right at the beginning we talked about engagement. This is really important to any sustainable investing strategy. Communicating with companies to create change, and working with governments, civil society and regulators to create the right environment.  So why have we waited so long to bring it up. Because without your long term investing strategy, engagement is pretty meaningless. Your strategy identifies what change your actually want and why, where you think companies should invest, what positioning they should adopt, what risks you want them to prepare for, and what you need to track to monitor progress. And this doesn't just apply to listed equities, the approach is equally appropriate for private companies, for infrastructure/real estate, and for debt and fixed income.

By now it should be clear that ESG scoring alone cannot get you to where you need to be. Yes, its really useful for making sure your portfolio is aligned with your values, that you are not invested in companies, products and solutions that you don't believe are right. And, it can give you data that helps track progress and identifies best practice. But investing in the climate transitions is about the future, not the past or the present. The aim is to support the goods and services of the future, that will replace the old economy.

Similarly, it should be clear that you need independent advice. Companies, their advisors, lobby groups and politicians all have an angle. they want to sell you something. That isn't a bad thing, its what makes a market, but its doesn't make them a good source of advice. And you probably want it from someone who has seen a few bubbles, economic cycles and collapses. Someone who understands that its better to get the direction of travel right than it is to have false precision and erroneous certainty.

Finally, you also need advice that takes a different perspective, that looks beyond short term market expectations. That thinks about what might cause people to actually support actions that hurt in the short term but give benefits in the long run, the psychology of climate change action. Advice that helps you think differently about how you manage your investment process and what you want from your asset managers. And in the supply chains, that thinks more broadly about issues such as human rights, something we think is going to become more important over time.  And finally, that has a perspective that doesn't start with what we would like to happen but what looks realistic. 

If you think we can help you, then get in touch. You will not be surprised to know that we don't offer packaged answers or investment solutions. Your requirements drive what we can do to help you meet your sustainable investing requirements.