One of the most common questions I am receiving is along the lines
“ While I want my investments to be safe and earn a good rate of return I am also concerned about being reasonably Environmental sustainable”
Some people do go further and express serious concerns while a few say “ Maximise returns – that’s it”
Okay so how do I reply ?
While I have my personal beliefs as your Financial Advisor I don’t believe it is not my role to advise or judge on the politics of issues like Climate Change.
My role is to advise you on the most suitable investment options available and how they may help you achieve your goals and objectives
Virtually ALL Fund / Investment Managers see these issues are critical to their ongoing investment decision
“Investment in renewables will be the key driver of $56b fund’s growth, says Cbus chief”
“Climate change will reshape finance, says world’s largest fund manager – Will make climate change central to investment decisions when investing it’s $US7 trillion”
These sentiments from today’s news are repeated every time I speak with Investment Chiefs.
In December I meet a UK based Investment Manager personally responsible for around $1.5 trillion. When asked about “fossil fuel” type investments he was very clear, “Yesterday’s investments – okay they will continue to be significant businesses for some time to come but very little, if any, new investment is being made.”
“They are already struggling to match returns from new technology especially renewables BUT if you need to invest new capital – forget it.”
In particular he “won’t touch coal – dead as a Dinosaur“. He confirmed the UK will be out of coal power production in just a few years
Investment Managers don’t allow emotion to rule decisions rather they look at what will deliver clients $$$ into the future.
What they are all saying is the way to make money into the future is :
- Continue to investment in New Age Technology – that’s where the big returns have already come in the 21st C and that trend will continue.
- Focus on Companies those Management that is “switched on” to what Society and their Employees are demanding – they all expect more and more attention on Government and Socially lead pressure on companies to respect the Environment and increase Social Responsible Practices. If they don’t they will suffer.
BANKS – Many people ask about whether Banks, in Australian and worldwide, are focused on these areas ? My belief is YES – It is my understanding that very few , if any , banks are investing in say Coal based investments – yes they will support some existing project loans, but new loan / equity – Forget it !
Again Banks are fundamentally “investment managers “ – they only lend money only if they think they will get a good return and get their money back
Ron’s POINT – Almost all the investments in which your funds are invested are already very conscious of the need to move away from these type of “old world industries” : While their decisions aren’t being made on “social grounds” it just makes good investment sense !
There is a huge divergence in what different people view as “environmentally/socially/ethically” acceptable and important.
When people ask me about investments labelled “Ethical or Socially Responsible“ the difficulty I have is truly understanding exactly what are their “rules” and where are really invested
Then a big issue is “what one person views acceptable others don’t “ eg
Woolworths – makes money from Poker Machines and Alcohol – is that acceptable ?
Banks – if they have loans to say Coal companies but are not making new investments is that okay?
They all lend to companies in the Defence Industry
Even say A2 Milk – some say they are effectively undermining the “average” Dairy Farmer by only supporting “select” diaries ?
BHP / RIO – Do many people really know what they mine ?
Facebook – are they acceptable ?
Chinese Owned Companies – are they acceptable?
You tell me !
Overall I believe that most Investment Manager I recommend are very aware and focused on the big issues, especially those most commonly believed to be impacting Climate Change. While not so much for “social reasons” ( although I suspect many are believers) but rather for economic reasons are rapidly moving away from those areas.
In the meantime always happy to chat to every-one especially those who have particular concerns or have definite views and requirements
Cheers and stay happy,