Climate change to impact investment decisions in 2018
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Sustainability is going to play an increasingly important role in the future of investments, according to a recent report on the outlook of sustainable investments in 2018.
In the Schroders Sustainability Outlook 2018 report, Global Head of Stewardship at the asset management firm, Jessica Ground, said that challenges presented by the impact of climate change: “will reach every corner of the global economy and investment sector.”
Her report will be welcomed by sustainable investment funds and by the large number of investors who are now directing their cash towards more environmentally sound investments, such as forestry schemes that focus on sustainable tree planting and harvesting. Such schemes provide habitat and help to absorb carbon dioxide from the environment.
At the beginning of December, news came out that Sweden-based insurance and pension company, Folksam, had invested an impressive EUR50 million in a forestry fund, which gives investors the opportunity to support forestry in the Baltic and Nordic regions.The value of the fund is intended to grow to EUR500 million, with the amount of forest land under management increasing simultaneously. Michael Kjeller, Folksam’s head of asset management, explained: “This investment in forestry assets suits us well and will contribute both to a continued good return for our customers and sustainable development.”
He added: “The investment provides us with real assets with a secure and stable cashflow, at the same time as having low correlation with the equities market.”
Ground’s report points out that investment groups and pension funds, for example, are putting increasing pressure on businesses to take sustainability and environmental impact into account when considering where to invest cash. However, the Carbon Disclosure Project reportedly found that there was a lack of transparency around corporate environmental policies that could contribute to deforestation. This is an area that unarguably needs attention and the level of transparency should improve alongside the demand for more ethical investments. Jessica Ground stated: “Examining companies without considering the social and environmental backdrop that will define future leadership is becoming untenable.”
However, despite the growing interest from businesses and investors alike, government policy is not keeping up, according to Ground. She explains that the world’s governments are failing to realise the potential and nurture sustainability and responsible investment.
GWD‘s spokesman, James Barrett, welcomed Ground’s forecast that sustainability will take centre stage when deciding where to invest cash over the coming year. “We advocate investment in sustainable forestry projects as a way for our clients to make an environmentally responsible and lucrative investment decision.”
A recent article in The Economist also echoed Ground’s outlook report, claiming that there is now a widespread hope that, as the next generation comes into more money, they will take the concept of sustainable investing and really run with it. The article explained: Fans of “socially responsible investment” (SRI) hope that millennials, the generation born in the 1980s and 1990s, will drag these concepts into the investment mainstream.”
Many commentators have been admitting recently that investing responsibly, in areas like sustainable forestry for example, does not have to mean sacrificing returns. The Economist article added: ” There may not be much evidence to support claims that SRI (socially responsible investing) outperforms the market, but there is enough to show it can match it.”