Schroders Global Investor Study 2017 of 22,000 investors from 30 countries around the globe reveals increased interest in sustainable investing.
How is America doing?
- 89% percent of Americans have some idea of what sustainable investing is, but their understanding varies.
- 55% view it as investing in companies that are likely to be more profitable because they are proactive in preparing for environmental and social changes.
- 48% see it as focusing on companies because they are best-in-class when it comes to environmental or social issues or how the company is managed.
- 19% view it as avoiding controversial companies (such as alcohol, tobacco or weapons manufacturing.)
- 82% of Americans say that sustainable investing has become more important in the past five years. When broken down by generation:
- 95% Millennials
- 50% GenX
- 51% Baby Boomers
Globally, respondents were more likely to say they embraced sustainable investing for its potential positive impacts (38%) than for profit (32%).
8 million tons of plastic will end up in the ocean every year.
It is estimated that 26% of plastics produced comes from plastic packaging. According to a recent study by CDP “Catalyst For Change,” plastic packaging has come under increasing scrutiny as it pollutes our oceans and clogs urban infrastructure. Plastics also use up 6% of global oil consumption every year.
As regulatory pressure pushes for a more circular economy in which used materials are re-incorporated into product life cycles rather than becoming waste, investors in the chemical sector should be aware of which companies are prepared for a low carbon transition.
The CDP report assessed companies on four key areas adopted from recommendations for company reporting from the G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD):
Transition risks: A company’s exposure based on emissions intensity, energy intensity and indirect emissions in the value chain including upstream and downstream emissions.
Physical risks: A company’s use and withdrawal of water as well as water quality and governance metrics.
Transition opportunities: A company’s progress and strategy in shifting towards a low carbon economy by looking at product and process innovation, low carbon revenues, R&D spending and use of renewable energy.
Climate governance and strategy: A company’s governance framework including emissions reduction targets and alignment of governance and remuneration structures with low carbon objectives.
While the report did not include companies from China, it did point out that they are big drivers of the supply and demand for chemicals.
80% of antibiotics produced in the United States are fed to livestock.
Antibiotics both enhance growth and provide a cheap solution to keeping livestock healthy. However, the increased use of antibiotics is giving rise to quite a dangerous situation. AMR, Antimicrobial Resistance, is a condition where antibiotics have no effect due to antibiotic tolerance from continued exposure. The use of antibiotics in livestock has been linked to drug-resistant infections in humans.
Epidemiologist Thomas Van Boeckel, Swiss Federal Institute of Technology in Zurich, recently published a report in Science Mag which outlines the current global threat and three possible solutions to counteract it.
The routine use of antimicrobials as growth promoters or their inappropriate use as low-cost substitutes for hygiene measures that could otherwise prevent infections in livestock.
Reduce meat consumption.
Americans, for example, eat an average of 260 grams of meat per day. Reducing global meat consumption to 165 grams of meat per day would reduce the global consumption of antimicrobials by more than 20%.
Impose a global cap on livestock antibiotic use.
By limiting the agricultural antibiotic consumption to 50 milligrams per animal, which is less than half of the global average, we could reduce antibiotic use by 60%.
Tax antibiotics used in agriculture.
Imposing a 50% tax on antibiotics used in agriculture could reduce global consumption by 30% and generate funds for more research into alternative hygiene methodology or new antibiotics.
Van Boeckel states that using all three methods could reduce global consumption of antibiotics in agriculture by 80%. However, he also points out that transparency in the industry is necessary if we are to be able to tackle the overall problem.
“It’s crucial that more countries and the animal health industry report how much antibiotic is sold for animals. That would help us more accurately estimate the impact of each strategy.” – Thomas Van Boeckel
The development of commercial solar for small companies has traditionally been at a disadvantage because banks won’t finance them. The lack of a credit rating system for small companies as well as the transaction costs for small projects keep banks away. Sunwealth has developed its own underwriting system to assess creditworthiness. And, by pooling small projects together, Sunwealth is able to cut transaction fees enough to make the investments attractive.
Sunwealth, is a Boston-based clean energy investment firm that aims to provide investors with both market-rate returns and a concrete measurement of their impact. They pool together a variety of commercial solar projects such as installations on retail space, office buildings, schools, firehouses, churches; then develop, underwrite and manage them.
Investors take part in the Solar Impact Fund by financing groups of projects, with each tranche consisting of a bond and a tax equity offering. In addition to their quarterly financial statement, investors also receive an impact report that quantifies the environmental and social impact of their investment in the previous quarter.
Measuring impact is critical to growing the impact investing market in order to prove to investors that the strategy of investing for both financial and social/environmental benefits is effective.
For a 5.25 year investment with a current after-tax internal rate of return in the mid-teens, investors need a minimum of $25,000. The 10-year bond has a minimum investment of $10,000 and an expected rate of return of roughly 6 percent.
“Tim O’Reilly has been the conscience of the tech industry. Originally a publisher of technical manuals, he was among the first to perceive both the societal and commercial value of the internet.” He also popularized the term “Web 2.0.”
In his new book, WTF: What’s the Future and Why It’s Up to Us, O’Reilly celebrates technology’s ability to create magic—but he doesn’t avoid pointing out its potentially dangerous consequences.
Algorithmic systems do exactly what we tell them to do, with unintended and sometimes frightening results.
The capitalist impulse to maximize profits regardless of social consequences is an out-of-control algorithm.
As we learn from tech, algorithms need continual improvement. You don’t just set them in motion and leave them forever. For example:
Google optimizes for relevance (in both search results and ads).
Facebook optimizes for engagement (and we can see how that went wrong with ‘fake news.”)
What do our financial markets optimize for? Shareholder value
The financial markets, as the first rogue AI, are hostile to humanity.
“Income inequality, declining upward mobility, and job losses due to technology are not inevitable; they are the result of design choices we have made in the algorithms that manage our markets.”
O’Reilly points out that just as Google updates its algorithms for relevant search and ad results, and Facebook struggles with rethinking user engagement in response to fake news –
“We must now rewrite the algorithms that shape our economy if we want our society to prosper in the age of the brilliant technologies of the 21st century, and use them to create a more human-centered future.” – Tim O’Reilly
Ever the optimist, O’Reilly thinks that it is possible to build a better economy for everyone and invest in people. He raises the hot issue of “why technology is so often being used to eliminate jobs and to make a small segment of society ever richer rather than being used to do more, to solve the great problems we face today and to make society as a whole prosperous.”
For O’Reilly , “the answer is in the fitness function we have given to our economic algorithms, and the unexamined rules we use to guide our economy.”
And within his answer is a grave warning for companies that “only use technology to do less by getting rid of people.” These types of companies will be surpassed by those who use technology to help them do more, not less.
“Companies must commit themselves to continuously educating and empowering people with the tools of the future, not just treating them as a cost to be reduced.” – Tim O’Reilly