By Vaughan Lindsay, CEO of ClimateCare
In this piece, Vaughan Lindsay, CEO of ClimateCare, maintains that investment firms must take responsibility for their carbon emissions in a way that delivers real, measurable results for the environment, global consumers, and their business.
Larry Fink, the CEO of Blackrock recently commented, “coming out of the crisis, we have an opportunity to accelerate towards a more sustainable world. The pandemic we’re experiencing now is further highlighting the value of sustainable portfolios.” And I for one, couldn’t agree more.
Over the past two years there has been a substantial shift in how many corporations think about the impact they are having on the environment. An increasing public awareness of climate change and changing consumer behaviours has catalysed this shift, which when combined with pressures coming from investors and Governments, has driven increasing climate ambition and action in the investment space.
In addition to this, comprehensive analysis from ECIU and Oxford Net Zero has revealed how over two thirds of the global economy are covered by Net Zero goals. As such, companies that have previously engaged with climate change mitigation mainly due to corporate social responsibility (CSR) are now beginning to see it as a business-critical issue. Robust and transparent Environmental, Social, and Governance (ESG) policies that go beyond ‘do no harm’ are no longer a nice to have; they are now fundamental to business success.
Not only is there an increasing consumer awareness about the climate – resulting in customers actively choosing those brands that are more purposeful and active in the sustainable space – but there is also a greater awareness amongst employees too with regards to what their organisation is doing when it comes to sustainability and ESG, and indeed, who they choose to work for. Ultimately, if organisations aren’t thinking about how to make their products and services climate neutral, they may end up losing their best calibre talent to their competitors and struggle with employee acquisition too.
And certainly, we have been witnessing this in the investment space too. Many investment firms are also looking to a future in which they prioritise ESG and meet their Net Zero targets. However, while much needed, setting these long-term targets does little for the environmental damage that is being done right now and as such we need both longer-term plans for systemic change, as well as immediate action today. Ultimately, it is today’s emissions that are causing tomorrow’s climate change and we need organisations to take full responsibility for their carbon emissions right now.
We increasingly get inquiries from private equity houses, and asset managers, saying they’ve offset their business travel and office costs. Whilst this is a positive first step, it’s usually just a very small part of their carbon footprint. What we then need to ascertain is what more they can do to strengthen their climate action across their entire investment portfolio.
The next step for these investment companies is to become climate neutral investors. Doing so, involves a whole suite of actions that include screening to avoid highly carbonised sectors, understanding the carbon footprint and awareness of their investee companies, taking action to reduce this carbon footprint, and offsetting their residual emissions. But the value in doing this can be quite remarkable. Because taking a climate neutral approach can actually help private equity houses with raising funds too, as investors are increasingly selecting those with strong climate credentials. And frankly, failing to do so may mean they lose out to their competitors.
With more than $2 trillion in investments already committed to carbon-neutral investment portfolios by 2050, there is a real opportunity for some big changes ahead in the investment space. For those investment companies that accelerate their ambition today by compensating for residual emissions with a robust carbon offsetting programme, they can strengthen both their value and their brand. And certainly, this is just the scale of ambition that we need to tackle global climate change.
And Triton Partners is not alone in this mission. We are seeing many other investment companies taking full responsibility for their climate impact and proving that doing so is both good for the climate, as well as good business.
In short, the time to act is now. A robust and transparent climate strategy is no longer optional in the investment sector. It’s an essential element of a successful investment strategy to attract new capital, manage climate-related risks, and harnesses the opportunities of an economy transitioning to a low carbon state.