With the intense temperatures linked to climate change, Theresa May sought to cement some legacy before stepping down as prime minister – by enshrining in law a commitment for the UK to reach net zero carbon emissions by 2050. My colleague Louisiana Salge has written an informative piece on the subject, highlighting some of the positives, as well as limitations and contradictions inherent in this approach.
With that in mind, people often don’t know that their money can actually play a role in solving the world’s challenges. A recent video from Quietroom struck me as a great example of how to make sustainable and impact investing relevant to ‘the person on the street’.
Most of you are now familiar with our impact calculator where for example an investment of £20,000 in the EQ Positive Impact Adventurous Portfolio can be associated with the avoidance of 2.8 tonnes of CO2 emissions over the last year, equivalent to taking a car off the road. This impact is achieved through the technologies developed by companies we invest in around renewable energy and energy efficiency. You can find more information on this in our latest quarterly update.
I am often asked about the long term impact of sustainable investing. Unlike consumers who can drive changes in companies’ sustainability practices relatively quickly (clothing in the 1990s, plastic in 2018), investors switching their pensions or ISAs to sustainable investing will reap the rewards of their actions over time in two ways.
Firstly, by allocating capital to companies that provide solutions to the world’s social and environmental challenges, those companies can then gain access to cheaper capital and scale-up faster. With more money being diverted to sustainable firms, the ‘snowball effect’ also encourages their less sustainable peers to improve.
Secondly, by engaging with investee companies to help them improve the impact of their products and operations, we increase the likelihood of being able to tackle the ambitious UN Sustainable Development Goals by 2030. Shareholder engagement and active stewardship necessitates regular dialogue to drive change over time. But that change only starts once capital is directed away from unsustainable firms and towards those that are best placed to make the most positive impact in the future.
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