With the recent release of the United Nations’ Climate Report concluding that “there is no simple answer to the questions of whether it is feasible…to adapt to the consequences . . .” of its findings, it’s left many people wondering where to start addressing the daunting tasks at hand – especially with headlines claiming that taking action to combat climate change could cost America “trillions” of dollars. The finances of addressing climate action, however, raise an important question: Are these challenges—the environmental one and the financial one—mutually exclusive?
The short answer is no. But the long answer is a much more positive and informative one, touching on the increasingly evident idea that adopting environmentally-focused policies and priorities can, in fact, make for really good business.
The simple but powerful idea that both the environmental world and the world of business have begun to understand is that sustainability is a holistic idea. More and more investors are starting to understand the risk of putting their money into a business that is vulnerable to climate change, either physically or financially. Similarly, no good environmentalist would think of planning for either the short or long-term welfare of our immediate environments or our planet in ways that can’t be supported financially.
Underlining this point, we’re now witnessing a widening and deepening trend of global corporations betting on sustainable solutions. Only days after the U.N.’s report was released, one of the world’s biggest banks, based in the United Kingdom, announced an initiative to invest $330 million of the bank’s own pension scheme in renewables. The bank was not alone, as 30 other large firms across the U.K. joined the initiative.
Think this is just a progressive European trend? Think again. One of the world’s largest independent media and entertainment companies, with over $50 billion in revenue, announced recently that it was getting ready to flip the switch on a massive initiative which will see its own solar fields generate enough electricity to power two of its four U.S. theme parks.
A top Fortune 500 company similarly announced this month its own clean energy initiative. While in this case the move—swapping out fluorescent light bulbs in its stores with environmentally friendly LED’s—might seem less “sexy” than renewables powering a theme park, it’s no less significant since the simple switch will save the retail titan a whopping $200 million over time.
There’s no lack of similarly powerful examples of big businesses making these kinds of environmentally sound changes. And while the public relations score for these companies might be high, in my capacity as a financial professional I can attest to an undeniable fact: if these sustainability-minded changes weren’t good for business, the most ubiquitous, most successful companies in the world wouldn’t hesitate to find other ways of getting positive recognition.
Businesses like these, which are laser-focused on growth and corporate earnings, simply cannot afford to make dubious business decisions because they feel some kind of cultural pressure or a need to prove their environmental credentials. They’re making these changes because they know they will have a positive impact on the bottom line. And as a professional investor, I’m also willing to bet that we’re at a point in time where we will start to see businesses not just lauded for doing good, but to start being punished for not trying. For many investors who have hesitated to adopt impact investing due to potentially lower returns, this shift will be monumental. Investors will be more focused on the environmental, social and governance standards of a business because it will also mean higher returns for them.
While these huge, name brand companies may make a dent in the quest to take us closer to the 1.5-degree C goal, it’s also going to be about sustainable investing options for smaller companies and even all the way down to individuals. Something as simple as offering more impact investing options in employees’ 401K plans promote both the company’s lasting footprint and offer sustainable solutions for their employees’ retirement funds.
People around the world, from different backgrounds and falling across the political spectrum, want to patronize and work at businesses that are not only great at what they do, but are also committed to doing good for the world. And there are few things a business can do that’s better for the world than ensure we have the resources we need to continue thriving—as businesses, communities, countries, and together as a species—far into the future.
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