UN climate report increases urgency for green investment funds
Green investing has attracted a flood of cash and boosted companies like electric car maker Tesla Inc (TSLA.O) and clean energy company NextEra Energy (NEE.N) that promise to help a transition away from fossil fuels. But sustainable investment managers are confronting a two-sided challenge for ESG, or environmental, social and governance, funds.
Fund managers want to convert public enthusiasm into dollars invested while simultaneously allaying suspicions that some funds are “greenwashed” as skeptics claim.
“Not all ESG funds are created equal and investors must do their research to determine whether their investments are making a real impact or are simply feeding into an ESG-centered marketing push,” said Green Century Capital Management President Leslie Samuelrich.
Globally, sustainable funds hit a record high of $2.24 trillion in assets in the second quarter, Morningstar data showed, up 12% from the end of March.
Many of these funds choose their investments in part on ratings of portfolio companies’ sustainability assigned by outside firms, but these grades can diverge widely.
One of the biggest questions is whether to invest in fossil fuels at all. An increasing number of asset managers, such as Green Century, and pension funds, such as those of Maine and New York City, have said they won’t. Others argue it is better to work with energy companies to spur change.
“It’s easy to exclude coal companies or bad actors from your portfolio and only invest in companies that are green. The real impact comes from taking high carbon emitters and forcing them to modify their behavior,” said Michael Rosen, chief investment officer of Angeles Investment Advisors.
Angeles, which manages $7 billion in assets, would still own an oil company if it took climate change seriously, Rosen added.
Mark Hays, director of sustainable investing for Glenmede of Philadelphia, said climate change “is going to be increasingly financially material to your investment portfolio,” Hays said.
More consumers are holding brands accountable to sustainability commitments
Consumers are holding brands accountable for their commitments when it comes to sustainability, finds a BBC study.
BBC Global News found 81% agree that clearly demonstrating a commitment to sustainability adds value to a brand and 79% say sustainable practices and commitments are an important consideration when making purchase decisions.
The survey also found that 68% are happy to pay more for brands with strong sustainability and eco-friendly practices. Some 57% say they would stop buying a product they were previously loyal to if they discovered it was not committed to sustainability.
Among the survey findings:
- From the 27 brands surveyed across three sectors, around half of all consumers said they are not aware of the brand’s sustainability practices. Finance ranked by far the highest with 63% of all consumers not being aware of financial brands’ sustainability practices.
- 83% of consumers believe that brands should invest in education about the importance of sustainability and 79% agree that brands should be financing research for sustainable practices.
- Brand trust is still seen as the most important brand association for consumers across the region, indexing particularly high in the automotive and technology sectors at 87% and 83% respectively, with finance scoring 63%.
- 66% said that interviews with an international news partner are the most influential way for consumers to learn about a brand’s CSR, followed by branded content within a premium environment (39%).
Survey: 45% of EU firms report investments to address climate change
Approximately 45 percent of European Union (EU) firms report investments to address climate change.
Nearly half of firms in the EU have invested in energy efficiency, up from 37 per cent in 2019 to 47 per cent in 2020.
These are the key findings of a new European Investment Bank (EIB) report “European firms and climate change 2020/2021: Evidence from the EIB Investment Survey.”
“Firms need to plan today to gain a competitive edge or risk losing ground to more forward-thinking competitors,” said EIB Vice-President Ricardo Mourinho Felix.
“Nearly 60 percent of EU firms perceive physical risks, while transition risk is less well understood. The majority of firms are unaware of the challenges ahead and how to adapt to regulatory changes that will affect their supply chains, products, or reputation.
The 45 percent of EU firms reporting investments to address climate change compares to 32 percent of firms in the US.
Despite higher energy efficiency investments than in the previous year, Europe’s energy savings potential remains largely untapped given the energy and non-energy benefits that these entail.