Investing for a low-carbon economy
What does investing for a low-carbon economy mean? In our latest podcast, Brian Blackstone discusses a new white paper, The decarbonizing portfolio, with Marisa Drew, Chief Sustainability Officer at Credit Suisse, and James Gifford, Head Impact Advisory, to find out more about low-carbon investing and how investors can use their capital to make an impact on climate change.
Climate change is both a risk and an opportunity that investors need to factor into their portfolio. Investing for a low-carbon economy requires investors to learn about new ways to assess how climate change will affect their portfolio. A range of approaches can also help investors use their capital to make an impact and fight climate change through their portfolio choices.
Investing for a low-carbon economy and the climate transition
When it comes to investing for a low-carbon economy, investors need to think about whether a company is likely to prosper or to suffer from the transition. A key challenge here is estimating the carbon exposure of an investment.
Investors need to go beyond simple carbon footprint measures and understand different types of emissions to gain a true picture of a company's carbon exposure. It's not just the energy consumption of the company itself but also all the emissions associated with products and services in the supply chain. If investors don't take into account these emissions as well, they risk having an incomplete view of the risks facing a portfolio.
Decarbonizing your portfolio is not the same as building a portfolio that helps decarbonize the world.
Removing carbon by growing green businesses
James Gifford points out that "decarbonizing your portfolio is not the same as building a portfolio that helps decarbonize the world." Investing for a low-carbon economy, where investors align their portfolio to companies that will benefit from a low-carbon future, is not necessarily the same thing as making choices that remove carbon from the world and fight climate change. By allocating capital to growing businesses in new green or technology sectors, investors can contribute to decarbonizing the world.
Push for climate change impact
Investors can also embrace shareholder engagement to make an impact and drive a low-carbon economy forward. By using the power and influence of voting shares, investors can encourage companies to address the low carbon challenge. Coalitions of investors can push for campaigns to drive specific change. For example, by putting forward proposals at an AGM to push for hard targets on CO2 emissions.
Finally, Marisa Drew reflects on the imperative of investing for a low-carbon economy. "Global warming is driving extreme weather disruption and is creating that global recognition that we simply must act. We can't sit by and wait and hope that this is a risk that will be someone else's problem."
She points out that investors today have the opportunity to invest in the drivers and agents of change and use the power of their capital to try to solve systemic problems. Investing for a low-carbon economy is therefore something all investors should begin to think more about.