After the release of two cornerstone reports on increases in global temperatures, financial managers at last week’s SRI Conference at The Broadmoor rallied the investment world around the issue of climate change.
“We have a system that allows for entrepreneurship, innovation and access to capital that allows for more entrepreneurship and innovation,” said George Gay, socially responsible investing conference founder and CEO of Colorado Springs-based financial advisement company First Affirmative Financial Network. “People today want to invest with their values and be part of social change, including tackling climate change.”
For investors, such actions move beyond simply divesting from fossil fuels or avoiding companies with a poor environmental record, Gay said. Rather, they can build portfolios made up of companies that bolster climate change mitigation through technology, lobbying and advocacy.
Jeremy Grantham, an investing giant and keynote speaker at the conference, is an outspoken advocate for putting money toward clean energy technology. Twenty percent of his personal net worth is invested in the industry, including a major project that has created the first solid-state lithium ion battery for passenger vehicles. The battery is half the weight and size of traditional lithium ions and could dramatically reduce the carbon footprint of the technology sector.
The urgency to elevate such technologies was especially heightened after a report released by the International Panel on Climate Change in October that detailed a strong risk of a worldwide climate crisis as early as 2040 if decarbonization didn’t occur immediately. Additionally, a study published in Nature last week suggested that oceans are warming 60 percent faster than the estimates by the International Panel on Climate Change.
“It’s a very close race that we’re watching between the damage (of climate change) accelerating and the technology to prevent it accelerating simultaneously,” he said. “The run of events has been against us, but there’s still a good chance that we can survive this if we do everything we can and ignite more response from investors, politicians and the general public.”
Persuading financial managers to jump on his bandwagon, though, requires an upheaval in the priorities of investing.
“One of the big problems with climate change is that it is a long-term issue, and one of the central weakness of modern capitalism is that it doesn’t do the long term at all well,” he said. “Investors, especially, have a short horizon — about three years ... and investors can see that a lot of damage occurs past the horizon. But some might say, heck with that, they’ll be retired or move on to another job.”
That mentality is beginning to shift. Natural disasters that scientists have said are exacerbated by climate change — multibillion dollar wildfire seasons, widespread drought and “never-in-a-lifetime storms” such as Hurricane Harvey — have increased awareness among the public and media. But, so far, not as much among investors, Grantham said.
“The greater realization for investors is that decarbonizing the economy will create enormous changes,” he said. “We don’t know much, but the one thing we do know is that the top line revenue in green energy and energy efficiency is guaranteed to be higher than the rest of the sectors of the economy.”
Wind and solar energy as well as battery storage technologies are “growing fast and will continue to outgrow the economy,” he said.
In Colorado, the two renewable-energy resources are the lowest-cost technologies for new electricity generation, according to research released in October by The University of Texas at Austin’s Energy Institute.
Gay also acknowledged the disparity between those wanting to do good and asset managers equipped to assemble portfolios that match that enthusiasm. On Sunday, First Affirmative announced an artificial intelligence-assisted technology that allows people to choose social criteria they want to avoid and lean toward to generate a portfolio in line with the social causes they care about.
“People then can apply their values for the environment, immigration issues, gender equality, anything with minimal effect on performance and risk,” Gay said.
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