There is little doubt that the biggest change to the SRI (sustainable and responsible investment) world over the last 15 years has been the increasing emphasis on environmental issues. Indeed this area is so significant that debate continues regarding whether or not ‘green’ investments are in fact ‘SRI’ or a separate form of investment.
There are sound arguments on both sides. However our view is that although ‘ethical’ and ‘green’ investments are often very different, and investor motivations often vary significantly, they are indeed at least linked. This is because focusing on environmental issues is an essential part of encouraging ‘sustainable’ and ‘responsible’ business practices – and supporting sound, forward looking ‘greener’ companies is inherently responsible – and essential.
There has been an endless flow of information demonstrating that we are living beyond our means and that our current lifestyles are not sustainable. This includes the Brundland Report (1987) which first coined the phrase ‘sustainability’ and the Stern Review (2006) which brought into sharp focus the potential economic impacts of Climate Change.
This has given rise to numerous environmental campaigns such as the ‘One Planet Living’ campaign . This campaign reminds people that we only have one planet, not three – which is the number of planets we effectively need given the rate natural resources are being used up.
The downsides to all this are clear – with the potential to effect not only our lifestyles but those of many generations to come.
The upside is that many of these challenges can be managed if we act fast enough. This will however require, amongst other things, significant investment.
To make the most of emerging investment opportunities investment managers will have to become increasingly expert at interpreting environmental issues and how they will effect companies as new future winners will no doubt emerge.
Established environmental investors have recognised this for some years – but there are also newer entrants to this market who are also building up significant research capabilities. This includes both established names and new boutique investors.
Opportunities exist to make the most of these changes across the SRI spectrum, however funds that focus more closely on these issues are Environmental funds, Sustainability funds and Clean Technology funds.