One in three Americans believes aliens have landed on Earth and are dwelling among us. There are quite a lot of things they do not believe in, however, including the importance of the fluffy stuff in investment.
Parallel reports from the European and US social investment forums on the perception of environmental, social and governance issues among investment consultants seem to show American consultants are much less comfortable with the concepts and less inclined to see them as a natural part of investment consultancy. This despite a general belief (expressed by 88 per cent of respondents) that client interest in these matters will increase in the next few years.
Fund managers are in the unhappy position of being able to see the oncoming train but unable to move because their hands are tied. Even though they think climate change is a source of investment risk, their short-sighted clients are not letting them do anything about it.
According to research by FairPensions, nearly 90 per cent of fund managers think climate change is an investment issue, but feel they can’t do anything because of short-term analysis and lack of demand from pension funds.
Investing in solar power this year generated a loss
Investing in a climate change fund is usually seen to be a responsible thing to do, so surely offering a climate change fund is something a responsible investment manager might do.
Not according to RCM, a fund manager with a long track record in sustainable management and a very successful (in assset-gathering terms) Ecotrends product. It does not, however, offer a climate change fund, because of concern it does not make sense as an investment strategy.
“Behold, my child, the Nordic man, and be as like him as you can,” exhorted Hilaire Belloc in Talking (and Singing) of the Nordic man.
That was before “Taking the Temperature“, a recent report from Insight Investment and Ethix SRI Advisors, found the 40 largest companies in the Nordic region are lagging significantly behind their European peers in their management of climate change risks and opportunities.
Am I the only one who thought, along with Belloc, the Nordic region was full of hearty outdoor types who would understand the importance of climate change? Apparently, although the companies surveyed are trying to sort out their governance and management with respect to climate change, most of them expect to increase their greenhouse gas emissions in the future.
It is particularly ironic given the commitment of the Norwegian government pension fund to ethical and sustainable investment. Clearly the domestic fund, which invests solely in Norwegian securities, has failed to demand sufficient of its investee companies.
The demand for climate change funds is set to soar, according to research commissioned by Pictet Funds. That’s right, demand for, not returns from.
Fortunately, it just so happens Pictet has a range of funds it feels fit that description. It’s not clear who the target audience of the press release is – surely it would be simpler just to email the seven Pictet partners who stand to profit from the firm’s canny trend-spotting and product development?
Are investors really so simple they are more likely to buy funds because financial advisers say they think they will sell more of them? Sadly yes.
Rainforest in Panama
Did you have an egg or bacon for breakfast? Did you use shampoo or showergel containing palm oil this morning? If you did, the chances are a little bit of the rainforest was destroyed for your morning.
“We are eating the rainforest every day without knowing it,” says Andrew Mitchell, head of the Forest Footprint Disclosure project steering committee and executive director of the Global Canopy Programme. If you are a fund manager, your investments are also probably responsible for large swathes of tropical rainforest being bulldozed.
Kermit the frog
Within a year, there will be enough issuers of green bonds for an index to be created, according to Christopher Flensborg of SEB, the Swedish bank that has partnered with the World Bank to pioneer these instruments.
Last year, the World Bank, with its increasingly rare triple A rating, issued around $370m of debt, the proceeds of which are to be used only for projects cutting carbon emissions in developing countries. Already this year, a second tranche has been issued to a single investor (the Treasury of the State of California) and SEB is now looking at a third round.