The 26th Conference Of the Parties (COP26), better described perhaps as the Climate Change Conference, has just ended in Glasgow, Scotland. Will it have saved the planet? Or is this question too dramatic to convince that what we believed was a climate crisis is now a climate emergency?
Former US President Trump declared that Climate Change was a hoax. His disciples lapped it up of course and no doubt it won him many votes in oil and coal producing areas. For four years the US was absent from global efforts to tackle the crisis which slid further towards catastrophe with a record number of unprecedented fires, droughts, storms and floods across the globe. Fortunately the US is now in more mature hands and it can again play a major role on the global stage. China, a critical player in the stakes, is also taking positive steps to combat the emergency.
But why we talking about climate in a money column?
Because we cannot separate climate action from money. To prevent temperatures from rising a further 1.5 degrees huge investments will be necessary and major sacrifices made by countries whose economies depend heavily on coal, oil or deforestation and who stand to suffer serious loss of income. While all countries agree it is desirable to cut emissions and aim for a ‘net zero’ carbon production, the cost of so doing is not evenly spread. Every one of the almost 200 countries who attended COP26 will have its own issues and challenges. It affects individuals too. How will governments persuade coal miners and oil workers to give up their jobs? Car factory workers may be spared; they can adapt to making electric cars but can you see geologists installing solar panels? But just as progress has always eliminated jobs and professions new opportunities present themselves and people will have to adapt if they are going to survive.
How can we as individuals help?
The big decisions have to be made by governments. But in democratic countries everyone has a voice. And our voices must be heard. In public for those who are bold enough to lead and via the ballot box for those who follow the policies and priorities of those seeking election.
We can also consider our own carbon emissions. Do we need to fly so often? The pandemic has solved that one for the past two years! How essential are our car journeys? Can we install solar panels to produce electricity at home? Will we be among the first to buy electric cars?
Can we adapt our savings and investments?
This is actually a major area where those who are in a position to save and invest can help divert funds from polluting companies to those that are more friendly to the environment. So-called ‘ethical’ funds have been around for decades. They mainly focused on avoiding ‘sinful’ products such as tobacco, alcohol or weapons. Consequently they were not as profitable as funds that were happy to embrace the ‘sins’. So only those who were prepared to pay a price for their principles tended to invest in them.
Today, the old ‘ethical’ funds have morphed into a massive and all-embracing Environmental, Social and Governance (ESG) sector. They can also be called ‘sustainable’ funds in that they can contribute indefinitely to humanity without destroying or taking anything away from the planet. Global sustainable fund assets are now approaching US$4 trillion. And far from expecting investors to make sacrifices for the privilege they have been outperforming most mainstream funds in the past year. They are being supported by regulators; in Europe for example, financial advisers are obliged to discuss ESG investing with their clients.
Where do ESG funds invest?
Some funds embrace all aspects of sustainability and are simply labelled ‘sustainable equity’, ‘responsible investing’, ‘climate change’ or similar while others are more specifically directed at themes such as ‘renewable energy’, ‘alternative energy’ and even just ‘water’. If you hold existing conventional savings plans you can usually find a few ‘sustainable’ funds in the product menus and can switch into them.
There are also some exciting opportunities, such as investing in energy storage facilities that take the strain when the sun is not shining on solar panels or the wind is not turning the windmills. Batteries in general, together with associated lithium, are also seeing a massive increase in demand. Individuals cannot buy ‘carbon credits’ but it is possible to share in their growth via Exchange Traded Funds (ETFs) listed on the US or UK stock exchanges. As these investment products are relatively new they are really suited only for experienced investors who understand the risks. Care must also be taken as the UK has experienced a number of scams, usually directed at the elderly, in the field of carbon credits.
So what am I doing to save the planet?
Well, last week I took my car for an emission test which I understand will become an annual requirement. It failed! So I have dutifully had a filter replaced and had a tune-up.
But more importantly I have recommended to many clients that they invest more aggressively in sustainable funds such as alternative energies and avoid those funds that invest in fossil fuels, although it has to be admitted that the latter are doing well as the world emerges from the pandemic. But as for the long term, fossil fuels will surely go the way of the dinosaurs.
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly in normal times! If you have any questions on this article or related topics or would like to receive a free monthly newsletter on financial matters you can contact him at email@example.com
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Copyright © 2021 Colin Bloodworth