Introducing "The Sustainable Investor"

Introducing "The Sustainable Investor"

“If you don't know where you are going, every road will get you nowhere" - Henry Kissinger. This is the blog for all of you who deal with sustainable investing, and who want to make better and more informed investing choices.

The time has finally come. After much thought, we are excited to announce that we have launched our new blog programme, The Sustainable Investor. Why should you read it, or even better subscribe? The response to that question is a long one, but then it's a complex area, so you shouldn't expect an easy answer! We know many of you will not read the full blog (although we hope you do), so we have put the really important stuff toward the top !

Who is this blog series written for?

Anyone who is involved in investing decisions with a sustainability emphasis, and who wants independent input - that is not trying to sell you something. So companies, long term focused asset managers, nearly all asset owners but especially family offices, HNWI’s, pension funds, endowments and charities, IR and risk teams, and communication specialists, and of course anyone who advises these groups.

Putting it another way, this blog is for people who want to use their capital to make a real difference to the sustainability transitions and, at the same time, earn a fair financial reward - and who are prepared to put the work in.

What do you get

We aim to give you the tools to create a map of the opportunities, the risks and the trade-offs, the unforeseen consequences, and the potential financial returns, cutting through the lobbying, the noise, and the confusion. To be clear, this is not financial advice and we don’t recommend funds or individual investments.

We will publish six to eight long blogs a month, plus four more blogs highlighting the key news flow you should be aware of, with the context you need to make sense of it. So over 100 blogs a year. For now, subscription is free, but even when we switch on the paid version, it will still be cheaper than the price of a couple of cups of coffee a week (or if like Sandy you drink soy mocha in central London, cheaper than one cup a week !). That has got to be worth it for the access it provides to independent thought on sustainable investing.

What will we cover

We will cover the why of sustainable investing, what works and what doesn’t in terms of actually making a difference. We will write on green investing, so electrification, clean energy, transport, and our built environment, plus agri-food (sometimes green but often dirty). Plus we will cover those adjacent areas, such as how the various transitions will impact our health, from obesity and diabetes, through pollution, to antimicrobial resistance.

Equally importantly, we will also cover the dirty stuff, so raw materials/supply chain, fossil fuels and mining - all of the things we need to keep our economy going, providing the materials we need more of if we are to drive the green transition.

And, we will encourage you to understand the bigger picture - how all of this fits together, why change can be hard, where compromises might be needed, what levers work best, how management can embed sustainability into an organisation, how engagement can make a difference, and why issues such as human rights and supply chains are becoming more important to investors.

Sustainable investing is a lot more than ESG scoring, which, on its own might help you better manage the risks in your portfolio, but it will not prepare it for the opportunities and risks of the future.

At our core is a belief that sustainable investing is about more than just financial data. But then investing was always this way. We have always had to contend with the non-financial factors -  intangibles, R&D, brand value, interactions with local communities and environments, employee motivation, and innovation. This sustainability world might feel different, but it's still something we can include in our investing behaviour - the principles of competitive advantage and long term returns still hold.

Someone once described our work as strategy analysis, with a sustainability and investing perspective. We think that is pretty fair. .

As this is the end of the introduction, it’s the time to say

Our blogs and all website content are solely for informational purposes and should not be construed as investment research (as defined by the FCA and other regulators). Nor does it have regard to the specific investment objectives, financial situation or particular needs of any specific recipient - it's not investment advice. We (being the writers of The Sustainable Investor blogs and the publishers of related websites) do not promote funds or suggest you buy or otherwise invest in specific securities or other financial instruments. Any reference to a company is illustrative only, and should not be seen as a recommendation or a comment on valuation. You should not rely on the blogs, data or other information provided for making financial decisions. You should consult with an appropriate professional for specific advice tailored to your situation and/or to verify the accuracy of the information provided herein prior to making any investment decisions.

For now it’s all free - but we will soon be introducing a paid version. If this sounds interesting, and you want to read our blogs, they can be found here and here. As well as our website we publish here on Substack and on LinkedIn newsletters. So subscribe now.

Why are we writing this

After all, we could have a much easier life in the corporate world !

We think there is too big a focus on regulations, ESG data, global conferences, and what governments are subsidising. Don’t get us wrong, all of these things are really important, but they are not the whole picture. If we cannot design a system that properly mobilises vast amounts of private sector capital in a way that actually makes a real difference, that has an impact, and that moves beyond promises to real action, the transitions will fail. Full stop.

We also believe that too many investors rush from “there are lots of problems to fix” straight to “selecting the solutions”. On the way, a really important stage gets missed - the sustainability plan or strategy. This is not some abstract thing, it's the foundation that stops us being susceptible to greenwashing, green wishing (the act of hoping that a simple and pain free solution will fix a complex problem), and the risk of investing in projects that sound good but that turn out to be blind alleys or perpetual loss makers.  And by skipping this stage, we often don't even get to ask the right questions. About what challenges we want to help overcome, what risks we are prepared to take, and what returns, both financial and otherwise, we are looking for.

This is all perfectly understandable. Much of what we need to do looks incredibly complex, very interconnected, and full of compromises and trade offs. And so it’s easy to listen to the siren song of simple solutions that sadly don't, in the end, give you what you want. We can help you avoid that, and help you make a real difference, while still earning a fair financial return.

The ESG culture wars are unproductive

The Sustainable Investor was created out of a frustration at the emerging ESG culture wars. There is a lot of very detailed analysis published on the sustainability and climate related challenges we face, and lots of good work on what we “should” be doing. And no end of conferences, and promises by governments, industry groups, and large companies. Plus providing ESG related data is now big business. And despite all of this, progress on the transitions is painfully slow and in many cases non existent.

And if anything opposition, especially to what is labelled ESG, is increasing. The whole space has become increasingly politicised and weaponised. It doesn’t have to be this way.

Our focus is different from the traditional ESG blog. As our tagline says, it’s about helping you identify the practical and financially viable solutions that could make good investments for companies and investors, and that will make a positive contribution to fixing some of our most vexing issues. This is not just about technical hardware solutions to environmental challenges. We also need to understand the “softer” aspects of the sustainability transitions. The barriers to change, how best to communicate a sustainability strategy, why human rights are becoming more important, and how the transitions will impact our lives more widely, so our health, biodiversity and social cohesion. These are all things sustainability investors need to understand - they make a difference to what makes a good investment.

Our practical experience

Our analysis is drawn from the team’s long and practical experience in engineering, finance, investing, business psychology and human rights. In a world of lobbying, and the subsequent gross oversimplification and politicisation of the issues, we aim to give you clarity and independence, to help you build a better understanding of the wider implications of your investing choices. To see the team’s experience, click here.

Why should companies and investors care about sustainability

We believe that the science is clear, climate change and environmental damage is real, and its impact is accelerating. We need to change how our economy and society works, or we face the real risk of a disorderly transition, with all of the negative consequences that this would bring. But, this is not just about the environment and carbon, our societies are changing, and as investors, we need to positively respond to this.

We need to get ahead of challenges such as rebuilding our food systems, and materially upgrading supply chains and production processes. And we need to rethink how our actions impact the communities in which we operate, the way we recruit and retain staff, and how we nurture and encourage innovation. The companies we are involved with need to change how they communicate with their customers (and their stakeholders), anticipating their new needs, rather than being stuck in old ways of doing things. Finally, we need to prepare for what could be expensive adaptation measures.

This is about much more than ESG scoring

An ESG score is not an end in itself, despite trends toward using them to market investment funds. As useful as ESG scoring can be in terms of risk management, it only gets you part of the way to where you want and need to be.

We see compelling financial reasons why companies and investors (both asset owners and asset managers) should be an important part of this transition. By this we mean finding different, and better, ways of producing the goods and services we consume. For many, if not most, industries, there is a massive financial incentive to create more sustainable businesses - ones that have a viable long term future, companies with a defendable competitive advantage, that create long term value for shareholders and the wider society. Some of this will be changing what we already have, and some will be developing new solutions, the goods and services of the future.

The transition will be messy.

This should not be a surprise. We are after all trying to balance three potentially conflicting objectives, mitigating climate change (in the widest sense of the phrase), adapting to its impacts (socially, environmentally and economically), and aiming to retain viable economies that can meet the future demands of their citizens.

There is no simple silver bullet. Every choice we make will have trade-offs and negative consequences. And we should expect to make compromises. We will need fossil fuels, synthetic fertilisers, and materials such as concrete and steel for many decades yet. This is not an excuse to kick the can down the road, it's a simple reflection of the complex reality we face.

We also need to be realistic about the financial implications. The transitions are likely to be inflationary, at least over a near/mid term time period. There is a lot of capital to be deployed that may not generate returns for many years. At the same time we need to keep existing systems operational, so double running costs.

Plus, we need to be realistic about how our choices could impact our financial returns. There is no win win. We cannot fix our sustainability challenges, and at the same time have lower risk, higher financial returns, and better alignment with our values. Some choices we make will likely deliver lower financial returns, at least in the short and mid term. And of course, there is the real risk that all of this will not deliver what we hope, that despite our efforts we end up with a 2 degree, or even 3 degree, world.

Time horizon

Which brings us to our time horizon. Our sweet spot is between two to three years, and ten years. So, just beyond the normal forecast period of investment banks, and still within the sensible range for corporates, family offices and endowments (the long term investing community). We think this is an under covered space from an investing perspective.

A lot of material is written on the near term opportunity, for instance, what the latest US "Inflation Reduction Act 2022" might mean for the next quarter or next year. And a lot of reports are published on why, if only governments would provide subsidies, this or that technology could be massive in say 10 years plus.  Both of these are important, but we argue that if you care about investing in the solutions that will make a difference to the sustainability transitions, and make that difference soon enough, the key period is the one in-between. It's here that you will find the solutions that will become critical over the coming years, some will happen quickly, others will be more of a slow burn.

It's challenging but we are still positive

To make this happen, we need to find ways of making the complex understandable, ways that don't involve politically incendiary, twitter length posts. We are encouraged by the emerging demand for more nuanced arguments via long form blogs, often 2,000 words or more. Not what you might expect in the world of tweets and sound bites. We believe that there is a demand for detailed and thought provoking analysis that bridges the current divides between sustainability, ESG, investing and the social and governance factors. One that comes at the opportunities and challenges from a sustainability perspective, and that doesn't gloss over the tradeoffs and compromises.

Just to repeat - our blogs and all website content are solely for informational purposes and should not be construed as investment research (as defined by the FCA and other regulators). Nor does it have regard to the specific investment objectives, financial situation or particular needs of any specific recipient - it's not investment advice. We (being the writers of The Sustainable Investor blogs and the publishers of related websites) do not promote funds or suggest you buy or otherwise invest in specific securities or other financial instruments. Any reference to a company is illustrative only, and should not be seen as a recommendation or a comment on valuation. You should not rely on the blogs, data or other information provided for making financial decisions. You should consult with an appropriate professional for specific advice tailored to your situation and/or to verify the accuracy of the information provided herein prior to making any investment decisions.

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