Invest in the Climate
Can we all now please stop saying “climate change” and instead call it what it is: climate breakdown, climate crisis, climate emergency, ecological breakdown, ecological crisis and ecological emergency?
– 16 yr old climate activist Greta Thunberg, Tweet May 4: It’s 2019.
At Rally Assets, we work every day with individuals and organizations looking to increase the positive impact of their investments, from philanthropists, foundations and advisors to public and private corporations. Some want to ensure their personal investments are not funding companies and activities that are misaligned with their values. Others choose to actively create a meaningful legacy by financing important and much-needed solutions.
Foundations are increasingly leveraging impact investing as an innovative way to support their mission – one that uses all their assets, rather than just the 3.5% traditionally spent on granting to meet CRA requirements. Many foundations are looking to engage donors and clients, women and millennials, entrepreneurs and trustees, anyone who believes in the positive power of capital. Each investor has different values, vision and investment strategies. Most are concerned with the environmental impact of their portfolios, but some still struggle with the notion that climate change “isn’t our mission”.
The truth is, it doesn’t matter what your area of interest or mission is; you won’t be able to achieve it in a +2–degree environment. The challenges from severe weather, food shortagesand mass migration will affect everything you’re trying to achieve. The poor will be poorer, the sick sicker, and the vulnerable more at risk. Education, job creation, innovation, you name it – it will all prove harder to do.
Despite decades of warning by experts, global warming continues unabated. According to Canada’s Changing Climate Report, led by Environment and Climate Change Canada, Canada is witnessing double the level of global warming. In Northern Canada our sea ice is melting and permafrost disappearing. Meanwhile, the Intergovernmental Panel on Climate Change (IPCC) stated in a recent report that, to avoid the most damaging impacts of climate change, we must stay under a 1.5-degree increase in global mean temperatures.
The effects of climate change will impact every investment portfolio. Many organizations are intentionally changing their investment approach. Some are shifting investments to support the individuals and organizations negatively affected from the transition through job loss or other economic hardship. Others are using shareholder engagement to advocate for change from within organizations, encouraging them to adopt better practices. To date, over 300 investors with more than US $33 trillion in assets under management have signed on to Climate Action 100+, an investor initiative that hopes to inspire the world’s largest corporate greenhouse gas emitters to take necessary action on climate change. Others will intentionally shift their assets as have themore than 1000 organizations that have pledged a combined US $8 trillion in assets to “divest and invest” in clean energy.
As Shannon Rohan from SHARE articulates, “Numerous approaches can be used to address climate risk in an investment portfolio, from increasing exposure to low-carbon assets, to engaging with corporations on the reduction of their GHG emissions, to divestment from specific companies or sectors.” The approaches aren’t exclusive, she adds. “Together they can reinforce the ultimate aim of keeping global warming below dangerous future levels.”
Investing in clean energy simply makes environmental and financial sense. And anyone who eschews the opportunity is putting their organization at risk, from a reputational and financial standpoint. It is anticipated that a minimum of US$1 trillion worth of “stranded assets” will need to be written off the balance sheets of fossil fuel companies, driving down their valuations. The material risk of investing in companies that are not prepared for climate change is increasing. Just look at PG&E, the power giant that suffered the first climate-related bankruptcy after facing hundreds of lawsuits from fire victims and billions of dollars in potential liabilities.
To be clear, investing in climate change solutions is not just about CO2 emissions. It’s about clean water, it’s about the health of our species, it’s about conservation of land and animals, it’s about a circular economy – and so much more.
There is no one answer, but in fact many ways to increase the positive impact of your portfolio. On May 28th, at 2pm, Concordia University Foundation, Clayoquot Biosphere Trust and Mantle314 will be sharing their experiences in the webinar “Addressing Climate Risk and Investing in a Low-Carbon Future”.
This is part of Foundation Investing 2.0, a
Partner, Rally Assets Inc.