Wednesday, June 24, 2009

The Eco Bottom Line: Making Money

The first of a two part Green event organized by IFIC, yesterday’s breakfast featured Hadley Archer from the WWF and Elizabeth McGeveran from F&C Asset Management discussing how climate change is impacting the investment industry.

Hadley Archer, WWF’s Vice President of Strategic Partnerships, examined corporate social responsibility, and placed it in the context of WWF's Climate Savers Program, 22 companies that are working hard to reduce their environmental footprint. Archer hopes that these companies are also setting new and higher standards in their respective sectors, and preliminary research shows this to be the case.

Quoting work done by Michael Porter at Harvard Business School, Archer talked about how corporations need to analyze their opportunities for social responsibility using the same frameworks that guide their core business choices. Then they would recognize that CSR is not a cost or a constraint but rather a source of innovation and competitive advantage.

If the era of cheap resources is over (as everyone is warning us, most recently Jeff Rubin), then addressing carbon emissions will become a corporate advantage, or disadvantage. As companies come to terms with managing carbon risk, they will also have to look at carbon risk in their supply chains, asking suppliers down the line ‘what are you doing to manage carbon costs and risk?’.

What does it take to provide leadership on climate change? Archer suggests a company needs a holistic climate change strategy to reduce GHG emissions; targets, measuring and transparent reporting; investing in new technologies; and researching emerging areas.

Elizabeth McGeveran then took us through how F&C Asset Management looks at green business through the money management lens. She spoke specifically of their climate change mandate, which they manage for many investors around the world, and which is offered through Scotia in Canada.

Key drivers such as regulation, corporate and consumer behaviour and the physical effects of the changing climate are presenting us with global climate investment opportunities. She stressed that it is a very dynamic playing field, but nonetheless gave us some tips on who the winners will be.

In a world of climate change, which companies are poised to benefit? The first group are those whose products or services are mitigating the effects of climate change. This includes companies in alternative energy, energy efficiency, sustainable mobility and waste management. The second group are those who are involved in adaptation, where opportunities present themselves in water and food. The third and final group is supporting services, the consultants, the carbon traders etc.

McGeveran made the point that companies in the climate change portfolio are not necessarily environmental best actors. For example, nuclear power companies, which are excluded from many Canadian SRI mandates, are part of the climate change fund. As with so much of SRI, ‘it’s all about the trade offs’.

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