Remember COP26 and the Glasgow Climate Pact? Or even Earth Day last Friday? Such is the pace and sheer volume of news we're bombarded with from every corner of the globe, you'd be forgiven for forgetting the finer details of last year's climate change shebang. Or this year’s Earth Day theme (Invest in Our Planet).
Asset management brands certainly won’t let us forget how they’re planning on saving the world. Let’s create a sustainable future now. Responsibility works. Now is the time to power change. Zero-hour. If you believe the advertising (as an ad agency, we’d never suggest otherwise), we’re going to get a cleaner planet faster than you can say ‘triple bottom line’.
But sustainability is serious. Something that will affect the lives of billions of people and not everyone equally. Something that will take decades to achieve. Yet something that’s being delivered (for now) with more words than actions.
For investors, it matters. Adverse climate change could have a devastating effect on the global economy. We know there’s a huge appetite for funds that have sustainability (sometimes literally) written all over them. But the proliferation of ESG rating formulae and a history of investment greenwashing have left clients confused as to what the new and improved, whiter-than-white investment landscape means for their money and their long-term futures.
Rising energy prices have brought the problem into sharp focus. Apart from being told by energy companies to conserve heat by hugging a pet and performing star jumps, investors are being informed that many companies are thinking of rowing back on their clean energy commitments. Sustainability, for some, is proving too expensive.
Added to that is the lingering suspicion that investing responsibly means compromising on performance. It’s no wonder that polluting (but profitable) investments are often held privately.
So, what’s the solution? We believe asset managers need to remember their purpose (by that we mean their true reason for existing and why they matter to people). Not their press-friendly purpose of being the sustainable superheroes that will sort the environment at the flick of a switch. But their true purpose of investing (securing and, hopefully increasing) their clients’ money in an expert, considered and responsible manner. And, more often than not, that will mean investing in solid business models that recognise that sustainability is the only way forward. Profits and planet hand-in-hand.
The EU is trying to help with a new labelling system that identifies industries and services it deems environmentally sustainable. The hope is that asset managers will use it to tell investors, in a consistent way, how much of their investments can be considered green.
What’s interesting is that this isn’t greenwashing. The EU’s system aims to be pragmatic, recognising the longer-term potential of sectors such as nuclear energy to help reduce carbon emissions, as well as transition fuels such as natural gas. But could it go further?
Arguably, getting polluting companies to change their dirty habits is as important to net zero as investing sustainably. And that’s where asset managers can have real influence. It’s also one of the principles of successful investing – owning unfashionable companies, sparking positive change and making them popular again.
So, we say to asset manager brands: remember where your loyalty lies; don’t forget the investment story; be clear and true to your intentions; and recognise that you are an enabler, not the answer, to delivering a better future for everyone.
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