Is environmental transition a new industrial revolution?

Can sustainable investments offer sound financial returns as well as sound environmental practices in the fight against climate change?

One of the questions I’m most frequently asked in my role as investment counsellor is where is your accent from. No one has ever guessed the right answer – Barcelona, in the Catalan province of Spain and relatively close to the Pyrenees, the mountain range which separates France from Spain.

As a girl, my parents and I often visited the Pyrenees and the beautiful villages dotted around them.

One of the most vivid memories I have is of a reservoir called El Panta de Sau. The reservoir was created by flooding the valley in which it lies, and a little village called Sau was submerged beneath the water. It made for a stunning landscape, with the church steeple just visible when the water level was low. But it is changing.

Two years of drought have brought water levels down to an unprecedented level – below 10% of the reservoir’s capacity. Authorities are concerned that this is the first of five years of drought, and it is no longer viable to keep the reservoir open. This spring the fish were being moved and the remaining water emptied to another reservoir downstream.

The first picture below is how I remember the Panta de Sau and the second is how it looks now:

This is symptomatic of a wider drought across Europe. Rises in temperature this year are already equal to those scientists had predicted for 2050.

In my role as investment counsellor, the questions I most frequently ask clients are, “What is the purpose of your wealth?” or, expressed differently, “What are your goals?” And the most frequent answer is something along these lines: to provide for my and my family’s future, both now and for generations to come. Care for your family is understood to cover the basics, at least:

• Their financial needs
• The preservation of the environment they will live in
• Their general happiness and well-being

The natural conclusion would be that any investment strategy we adopt should not undermine any of the three aspects above, but instead should be aligned to them. However, there is sometimes a degree of hesitation or concern when a suggested investment meets the second or third goal – an investment that supports the idea of progressing to a future in which businesses thrive while the environment is protected and in which human rights are upheld.

I believe we’ve been sold a lie. We’ve been told we have to choose between sound financial returns and sound business practices. That the pursuit of both naturally compromises the pure pursuit of the other. So is this true? Are returns compromised? The data says absolutely not. In fact, it shows the opposite.

The data shows something quite intuitive – that good companies with sound business practices thrive and companies who exploit people and planet tend to carry far more risk, with a greater tendency to underperform.

Interested in finding out more? We would be delighted to share the data and demonstrate how sustainable portfolios can help you achieve your family’s goal of a secure financial future. The pursuit of a thriving planet is one of the biggest investment opportunities available to us. If we are to come anywhere close to achieving the environmental targets the government has set us, the investment required is of the magnitude of the industrial revolution. I wouldn’t want to miss out on that!

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our Client Services team.

If you would like to find out more about how we manage clients’ investments, please contact us on the number above or via our Contact us page.

Sources: BBC News

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