No windmill without steel, no electric car without copper. Asset managers should keep this in mind when considering “green” investments. Because if the industry does too much greenwashing, it can miss the chance to make a significant contribution to climate change. That writes Maxim Carmignac in her guest post for Personal-Financial.com. Your word has weight in the industry: The daughter of investor legend Edouard Carmignac is currently the managing director of the British branch of the French asset manager. She is the designated successor to Eduard Carmignac.
Steven Maijoor, chairman of the European Securities and Markets Authority (ESMA), recently said: “The more products that are said to be linked to ESG performance, the more we have to make sure that investors don’t buy products that to be marketed as sustainable without actually being. ”This quote says a lot about the confusion that is currently prevailing among investors. The question arises as to what a sustainable product is and which criteria are used to assess sustainability.
All asset managers are now focusing on the topic of ESG (environmental, social and governance) and everyone is particularly detailed on the environmental factor. Greenwashing is widespread and there has been real competition who is particularly environmentally friendly. Too often, the concrete goals of ESG funds are incomprehensible in the jungle of offers and there is a lack of transparency.
It seems necessary to remember that the following is a matter of course: The primary task of an asset manager is to increase the assets saved by his clients. It has been shown that the inclusion of environmental factors in the analysis of companies in which we invest is a factor for long-term value creation. Nobody denies this anymore. Recent studies, which show the reality of climate change and the sensitivity of civil society to the topic, should also convince the last skeptics.
That alone is very good news. In addition, we are of course personally pleased that asset management is becoming a key factor in the change in corporate practices towards a more sustainable economy. In this respect, the new decade ahead must be a decade of concrete action.
It depends on the environmental impact
Today, the majority of “green plants” focus on less than 40 percent of greenhouse gas emissions, essentially on renewable energies, electric vehicles and energy storage. However, the goal set in the framework of the Paris climate agreement to limit global warming to below two degrees Celsius by the end of the century is becoming unrealistic. In order to achieve this goal, investments are necessary to extend the energy transition to other sectors. We also need to completely revise our view of the role of industrial companies and raw materials in the fight against climate change.
There is too much at stake to be satisfied with empty words and dogmatic positions that are too often counterproductive. There is only one yardstick for this issue: environmental impact, and it must be quantifiable and objectively measurable. This requires firm convictions, our own analyzes and an active view of the environmental impact.
Metals and raw materials are an essential part of the energy transition. Copper, steel and nickel are just a few examples of indispensable raw materials for the production of electric vehicles and wind turbines – and thus for reducing the consumption of fossil fuels. An investment policy that excludes mining under the pretext of environmental pollution represents a real obstacle to the energy transition. Rather, as asset managers, we have to select those companies from these sectors that have the best growth prospects, because they offer products and services that the other sectors enable a reduction in their emissions.
The companies that produce the most carbon today can have the greatest impact on reducing carbon emissions, be it as a result of their production or products. Refraining from investing in these most carbon-intensive areas of the economic fabric is, however, a mistake in thinking. Rather, asset management has to accompany companies that, in the course of their business activities, make concrete efforts to use renewable energies and protect the ecosystem in which they operate by they reduce negative environmental impacts. It is then our job to carefully review the progress made.
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