Thematic Thoughts
Thinking about the big issues around how sustainability links into the world of finance
Wednesday Brunch: who should act on deforestation ?
Deforestation is an important sustainability challenge. And it's one that investors should care about. What is less clear is how we can actually make a difference. Part of the answer is engaging with companies to prepare for & meet regulations. But can we (and should we) do more?
Sunday Brunch: nothing in investing is easy
We recently wrote about the importance of narratives. Investors need to fully understand the current narrative before they can identify where it might be wrong. And this is a lot harder than you might think. It takes a lot of work. But it's worth it.
Sunday Brunch: changing the narrative - electric trucks !
We recently wrote about the importance of narratives. And how changing the narrative can influence investor behaviour and improve company engagement. One common narrative is that while passenger EV's might be taking off, it's a lot harder for trucks. But is this really true?
Sunday Brunch: the risks around new technology
Investors think about risk weighted returns. And solutions that need considerably more development or a lot of cost reduction are more risky. Which require much higher potential financial returns to make them attractive. This has real implications for the funding of some sustainability solutions.
Sunday Brunch: narratives - the stories we tell ourselves
Narratives drive financial markets, the story we tell ourselves comes first, and we often fit the data around it. A good narrative can be better than good financials. And the same applies to sustainability. People need a story to anchor their beliefs - so maybe focusing on numbers first is wrong.
Sunday Brunch: how human capital creates financial value
If we cannot explain how people add financial value, it's hard to get companies to adopt better human capital practices, and to get investors to take it seriously. The good news is that we have a framework, it's called Corporate Architecture - and in a way it's similar to good building design.
Sunday Brunch: what you 'believe' is really important.
Our 'beliefs' frame both what information we collect on climate & sustainability challenges, and how we think about possible solutions. Sometimes these beliefs cause us to support solutions that don't work, and even worse, may never work.
Sunday Brunch: How long can companies sustain competitive advantage?
What a company is worth comes from how much financial value it creates, which mostly is driven by future investments. In financial speak the most important part of this is a companies competitive advantage period (CAP). Sustainability issues are an important driver of how long this will last.
Sunday Brunch: What can we learn from the Tobacco Master Settlement Agreement
Back in 1998 the four largest US tobacco companies, and 52 state and territory attorneys general, signed what was boringly known as the Master Settlement Agreement. It changed the tobacco industry. Will social and environmental cases now working their way through the courts bring similar changes ?
Sunday Brunch: Can we rely too much on one technology ?
Much of the time it's right to argue that we need to focus on 'everything, everywhere, all at once'. But not always. Sometimes, when we look at sustainability challenges from an investor perspective, expecting new technology to solve our problems is too risky.
Sunday Brunch: What does mispricing climate risk mean?
Are financial markets mis-pricing climate related risks? This is not just about global issues such as the macro impacts of climate change. It's just as much (if not more) about the very specific risks that individual companies face. It's these individual risks we also need to clearly identify.
Sunday Brunch: Sustainability, market pricing and canaries
Many people think that financial markets are not yet fully pricing in climate and other sustainability risks (& opportunities). How might this change? One possibility is time. The other is that early warning systems like insurance and debt costs kick in - these could be our canary in the coal mine.