This year, the Intergovernmental Panel on Climate Change (IPCC) will produce its first climate science assessment report since the 2015 Paris Agreement was signed.
The Synthesis Report, to be produced in September, will be a compilation of data from the three Working Group Reports, which encompass writings on The Physical Science Basis of Climate Change, Climate Change Impacts, Adaptation and Vulnerability and Mitigation of Climate Change.
Furthering the conversation, the annual UN Climate Change Conference (COP27) is scheduled for 6-18 November, with an Egyptian initiative intending to “enhance investments in different climate action sectors.” As an investor, it is possible to contribute towards achieving these climate action goals that will be discussed, and put oneself near the forefront of impact. Indubitably the opposite, making decisions that negatively impact the environment, is also possible, and unfortunately more of a reality for the majority of investors. Therefore, investors have a responsibility to conscientiously acknowledge the role that they play, and ensure their investments, in turn, are as ethical and sustainable as possible.
At the moment, ESG investing – “Environmental, social and governance” investing – is something that only 25% of investors say they have heard a sufficient amount about, also referred to as “SRI” – “sustainable, responsible and impact investing.”
Ultimately, investing in a company is claiming faith in its growth and presumed positive trajectory. If a greater number of investors would pull their money out of investments in fossil fuel companies, turning their focus instead towards “green stocks,” including renewable energy sources, wonders would be done for the climate change problem. “Green stocks” are those that are associated with companies that are intending to do their best to protect the environment, have concrete climate solution goals, and/or are working toward producing products that will better the climate crisis. It is important to divest from putting one’s money into supporting companies that are defeatist in regards to their environmental impact, and instead turn towards researching ones such as those on the Carbon Collective’s Climate Index. Examples of recommended “green stocks” include batteries for electric vehicles, biofuels, and bioplastics.
Notable, however, is the amount of companies that declare their company as sustainable, but haven’t produced any data to back up these claims. It is beginning to become all the more important to ensure one’s investments are ethical and sustainable because of this notoriety to parade around the “sustainable” label without accompanying it with bona fide change. This is particularly relevant as only 35% of interviewed investors mentioned researching a company’s environmental impact or record before investing, and only four in ten stated they reviewed corporate governance policies and/or social values advocated by company leadership. Expense ratios and a fund’s holdings could be important factors to research, as well as what respective companies have already done to enact change, not merely what they have laid claim to.
As a whole, putting one’s faith in climate-aware companies and systems as well helps us pave the way for a future that’ll better accommodate solutions for the climate crisis. It is of utmost importance when investing to not only consider one’s personal gains, but also the larger impact held by owning a portion of stock in a company, and what it means to be backing a larger entity in this way. Being forward-thinking about one’s investments is a salient trait for both a newcomer to investing and the most experienced investor – it all can begin with consideration of ethics and sustainability.
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