The line between investor’s personal ethics and their investments is starting to blur.
The universe of sustainable funds has—in response to this—swollen.
Here, four fund managers discuss the tips and tricks that make their sustainable strategies effective.
View climate as a piece of a broader puzzle
A-rated Thomas Sørensen and AA-rated Henning Padberg, managers of the Nordea 1 – Global Climate and Environment fund:
'The climate and environment trend has never been so strong. The commitment of almost all countries in the world to COP22 clearly shows society wants change. More importantly, there is a growing willingness across every element of society to contribute proactively to a more efficient and sustainable world.
'Innovative products and services we thought only belonged to sci-fi are already part of our lives. A good example can be seen in ‘smart cities’. Integrating technology and intelligent connectivity to solve real-life issues – such as traffic, energy and water distribution – improves our quality of life and helps cities manage resources more efficiently. Companies in the areas of energy efficiency, smart grid, advanced materials and intelligent construction are deploying cutting-edge technologies to support this change.
'Before the financial crisis, the climate and environment scene was mostly driven by politics, in areas such as subsidies and regulation. Today, it is all about economics. Investing in climate solutions is a rational decision for consumers and enterprises.
'The economic incentive, where it makes economic sense for both consumers and corporates to invest in climate solutions, has clearly reached an inflection point. Companies understand improving sustainability is vital to remaining competitive in today’s world.'
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Be aware of emerging issues
Louise Dudley, global equities manager, Hermes Investment Management:
'The transition to a low-carbon economy is driving innovation through research, development and the adoption of new tools for change. However, we also recognise that further research, analysis and evaluation of climate- and carbon-related risks is needed.
'One such area is the financial risk associated with carbon pricing models. This hinges on a company’s carbon efficiency, geographic location of operations, business model, and market conditions sector-wide. Moreover, a company’s business model and broader market conditions will also dictate whether companies are able to absorb the increased costs related to carbon pricing models or pass them on to their customers.
'At present, we are currently expanding the work we already carry out, evaluating the usefulness of analysing financial risk in carbon pricing models. And as we seek to drive long-term progress towards a low-carbon future, we will continue to step up our response to climate change to better understand the scale of carbon-related risks and opportunities.'
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Offer the carrot and the stick
Chad Slater, joint chief investment officer, Morphic Asset Management:
'There is a saying that “markets are made at the margin”: that it’s the incremental change that drives the direction of the market. If I look at the world today, the incremental change is in the direction of people wanting to change their prior behaviour. One way that people can have an impact beyond a single Earth Day is to align their investments with their personal beliefs.
'Whilst some may argue capitalism is the root cause of the problem, I’d argue capitalism offers the next step beyond civic action. The role of capitalism is to allocate capital to those businesses that “better” and remove it from those that are “worse”. By investing with managers who support the former, investors can fund businesses that reduce emissions or create biodegradable plastic alternatives.
'But people can also work to raise the cost of capital of the incumbent industries that are creating the problem. It’s the other leg to a sustainable strategy. We run a Long/Short hedge fund that can short stocks that are harming the environment. We believe as more and more people change their behaviour, this will flow through to falling profits for these unsustainable businesses, thus our investors will have both made the world a better place and profited from it at the same time.'
Leave a comment!
The line between investor’s personal ethics and their investments is starting to blur.
The universe of sustainable funds has—in response to this—swollen.
Here, four fund managers discuss the tips and tricks that make their sustainable strategies effective.
Leave a comment!
The line between investor’s personal ethics and their investments is starting to blur.
The universe of sustainable funds has—in response to this—swollen.
Here, four fund managers discuss the tips and tricks that make their sustainable strategies effective.
Leave a comment!
View climate as a piece of a broader puzzle
A-rated Thomas Sørensen and AA-rated Henning Padberg, managers of the Nordea 1 – Global Climate and Environment fund:
'The climate and environment trend has never been so strong. The commitment of almost all countries in the world to COP22 clearly shows society wants change. More importantly, there is a growing willingness across every element of society to contribute proactively to a more efficient and sustainable world.
'Innovative products and services we thought only belonged to sci-fi are already part of our lives. A good example can be seen in ‘smart cities’. Integrating technology and intelligent connectivity to solve real-life issues – such as traffic, energy and water distribution – improves our quality of life and helps cities manage resources more efficiently. Companies in the areas of energy efficiency, smart grid, advanced materials and intelligent construction are deploying cutting-edge technologies to support this change.
'Before the financial crisis, the climate and environment scene was mostly driven by politics, in areas such as subsidies and regulation. Today, it is all about economics. Investing in climate solutions is a rational decision for consumers and enterprises.
'The economic incentive, where it makes economic sense for both consumers and corporates to invest in climate solutions, has clearly reached an inflection point. Companies understand improving sustainability is vital to remaining competitive in today’s world.'
Leave a comment!
Be aware of emerging issues
Louise Dudley, global equities manager, Hermes Investment Management:
'The transition to a low-carbon economy is driving innovation through research, development and the adoption of new tools for change. However, we also recognise that further research, analysis and evaluation of climate- and carbon-related risks is needed.
'One such area is the financial risk associated with carbon pricing models. This hinges on a company’s carbon efficiency, geographic location of operations, business model, and market conditions sector-wide. Moreover, a company’s business model and broader market conditions will also dictate whether companies are able to absorb the increased costs related to carbon pricing models or pass them on to their customers.
'At present, we are currently expanding the work we already carry out, evaluating the usefulness of analysing financial risk in carbon pricing models. And as we seek to drive long-term progress towards a low-carbon future, we will continue to step up our response to climate change to better understand the scale of carbon-related risks and opportunities.'
Leave a comment!
Offer the carrot and the stick
Chad Slater, joint chief investment officer, Morphic Asset Management:
'There is a saying that “markets are made at the margin”: that it’s the incremental change that drives the direction of the market. If I look at the world today, the incremental change is in the direction of people wanting to change their prior behaviour. One way that people can have an impact beyond a single Earth Day is to align their investments with their personal beliefs.
'Whilst some may argue capitalism is the root cause of the problem, I’d argue capitalism offers the next step beyond civic action. The role of capitalism is to allocate capital to those businesses that “better” and remove it from those that are “worse”. By investing with managers who support the former, investors can fund businesses that reduce emissions or create biodegradable plastic alternatives.
'But people can also work to raise the cost of capital of the incumbent industries that are creating the problem. It’s the other leg to a sustainable strategy. We run a Long/Short hedge fund that can short stocks that are harming the environment. We believe as more and more people change their behaviour, this will flow through to falling profits for these unsustainable businesses, thus our investors will have both made the world a better place and profited from it at the same time.'
Leave a comment!