The 2021 United Nations Climate Change Conference (or COP26) officially kicks off this weekend in Glasgow and will last for two weeks. As the name suggests, these conferences have been going on for decades yet this year the build-up seems to be bigger, brighter and better than ever.
Maybe this means people are finally waking up to what it is and why it’s important. Which is almost bittersweet considering the amount of damage that has already been done. Nonetheless it’s refreshing to see the advocacy of tackling climate change at the top of people’s agendas, particularly in the investment world where there is the potential for huge impacts to be had.
Environmental, social and governance (ESG) have long been buzzwords in the investment industry, well before I joined it as a journalist in 2015. But during my six years as an investment specialist, the acceleration by which they have grown in popularity have been paramount. All of a sudden, everyone wanted to talk ESG to the degree that it has been met with criticism: ‘they’re just greenwashing, it’s just a tick-boxing exercise for them,’ some people might say. I’m sure I wrote an article or two saying the same thing at my previous workplaces. But while that may still be the case for some companies, I’ve realised saying or doing something is better than silence.
Most investment trusts have a clearly defined ESG policy on their websites (which can also be accessed in one place via the Association of Investment Companies’ new ESG section), even if that means clarifying that it does indeed invest in tobacco companies. Because transparency itself is a form of good governance. But what’s been even more encouraging lately is the amount of trusts now actively discussing their commitment to contributing to the global green economy or having a net zero emissions target by 2050 – or even sooner.
Earlier this year, Alliance Trust (ATST) set itself a target to transition the portfolio to net zero greenhouse gas emissions by 2050, reinforcing its commitment to investing responsibly. Its manager, Willis Towers Watson, said: “Climate change is one of the defining issues of our times and is at the forefront of developing and implementing the highest standards of environmental best practice in the investment industry.”
More recently, Standard Life Investments Property Income (SLI) announced it had purchased 1,447 hectares of upland rough grazing and open moorland in the Cairngorm national park for £7.5m. A statement explained the site supports 956 hectares for planting with natural broadleaf trees (about 1.5m trees in total) with around 115 hectares for peatland restoration, with the remainder open land to support biodiverse habitats. Fund manager Jason Baggaley described the move as a “significant opportunity for reforestation as part of [the trust’s] carbon strategy” while our resident property analyst, Richard Williams, thinks this trend could catch on as carbon emission has risen up the agenda and consciousness of everyone.
Then of course there are the companies whose bread and butter is helping the environment and working towards a greener future. The enthusiasm within the renewable energy infrastructure sector has been contagious. There have been nine new trusts added to the sector over the past two and a half years and two more are in the pipeline; Harmony Energy Income and Atrato Onsite Energy, the latter of which was just announced this week.
Atrato sees the UK’s commitment to a national net zero emissions target as one of its thematic plays should it make it to IPO. Its chair, Juliet Davenport, said: “The UK’s binding net zero emissions target in 2050 and the resulting future demand for green energy means that additional generation from low carbon sources such as rooftop solar is growing. The company will play a leading role in providing new green power capacity, delivering businesses a dedicated clean energy supply at a low fixed cost.”
There are clearly gains to be made from tackling climate change, of course from a social and humane point of view, but also financially. For all of those investors who grumbled that being environmentally-aware would mean dampening returns (I wasn’t one of those, thankfully): it’s time to wake up.
Following the success of our ESG Webinar Series in November/December 2020, we will be hosting this year’s ESG Webinar Series on 16th, 17th and 18th November 2021. Each morning will focus on a different aspect of ESG with managers having the opportunity to present on their companies and how the specific aspects of ESG are embedded in their investment approach.
We are pleased to announce that Natalie Kenway from ESG Clarity will be providing opening remarks at the ESG Conference. For more information and to sign up to one or all three of our webinars, visit our events page.