Last week’s landmark climate agreement signed by more than 190 countries at COP21 in Paris marks a turning point in the effort to curb global warming. Until now, our collective response to climate change has been utterly inadequate. The Paris agreement may still be insufficient, but as Mindy Lubber of Ceres has said, the low carbon economy has finally arrived.
And none too soon…. You don’t need to be a scientist to decipher the data:
2014 was the warmest year on record, at least according to NASA and the NOAA, and news reports suggest that 2015 will likely set a new record. Bloomberg has reported that 13 of the hottest years on record have occurred over the past 14 years.
After Paris, however, world leaders have now embraced the fact that addressing climate change is not only a moral imperative but an economic imperative as well.
This is a game changer.
Now, businesses and markets can do what they do best: invest, innovate and allocate capital in ways that ameliorate rather than exacerbate climate change.
As we determine how to best meet the goals agreed upon in Paris – limiting global warming to less than 2 degrees Celsius above pre-industrial levels – the investment community has an historic opportunity to be part of the solution.
Moreover, while the shrinking number of flat-earthers in the denial camp may continue to argue that addressing climate change is unnecessary, or too expensive, or will slow economic growth, there is mounting evidence that the opposite is true.
Consider the following:
The transition from an industrial age economy powered by fossil fuels to a sustainable economy powered by clean energy, resource efficiency and innovation, will quite simply unleash an unprecedented period of innovation and growth. Investors can profit from this transition, and the opportunities to do so will be manifold.
How do investors do that?
We can choose to invest in companies that are creating solutions to environmental challenges, and in doing so we can weigh in on – and have an impact on – this greatest challenge to the global community.
We can choose financial intermediaries and investment strategies that focus on reducing emissions and reducing our carbon footprint, be it through fossil fuel divestment or other carbon reduction strategies.
We can choose financial intermediaries and investment strategies that engage with the companies in our investment portfolios to persuade them to do better when it comes to reducing carbon emissions.
Sure, we can do all the traditional things to affect change: go out and vote, support candidates and causes, write letters to the editor, join a non-profit, drive a Prius, and so forth. But if we fail to deploy our investment dollars, we are leaving what is perhaps the most powerful arrow of all in its quiver. An investor who ignores climate change is like a voter who fails to show up at the polls – you are missing an opportunity to be part of the solution.
It’s time to engage, people!
Over the next few decades, our task will be nothing short of ushering in a Sustainability Revolution equal in significance to the Industrial Revolution that ushered in the modern period.
If we are to be responsible global citizens, we must hasten that change; and to hasten that change, we must become responsible investors. Investors can be part of the solution, or part of the problem. You can hope for change, or as Gandhi said, you can be the change. By becoming a sustainable investor, you can be the change.
I hope more and more people will consider doing so.
The statements and opinions expressed are those of the author of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security.