The impact of climate change is increasingly prevalent in our everyday lives. Between regular climate summits, increasingly extreme storms, and the hottest summer on record, it’s hard to ignore.
Many of us are already making changes in our daily lives to do our part, and how we invest our capital can make a significant impact on our collective ability to meet climate change goals.
Whether through public market investments, shareholder engagement, or even private impact investing, there are many ways to get involved in sustainable investing.
Innovation or Improvement?
If you’re looking for the latest technology sprinting out of incubators and accelerators or are interested in how the most prominent organizations turn their ships, there are myriad investment opportunities.
Young, green companies are poised to disrupt industries while limiting emissions and creating a more sustainable economy. They often draw on novel technologies or ideas and bring consumers and investors a new way of engaging with the world as they grow. There are a number of these companies that we think are positioned for growth and are excited to watch.
More established companies may arguably have a larger role to play in our climate change efforts since they’ve historically been some of the most active emitters. But, as regulation, public interest, and investor pressure have evolved, the more forward-thinking of these multinationals have evolved as well.
Many of these corporations are executing plans to dramatically reduce their own emissions and cultivate more sustainable practices, which could substantially impact our global efforts.
Investing in Impact
As investors, we look for and assess the most promising sustainable developments across emerging and established companies for our clients. Below are a few of the innovations and improvements we’re most excited about across industries.
Transportation is the largest domestic emitter of greenhouse gases (GHG) – accounting for 28% of 2021 emissions.[i] This means it also represents the largest opportunity for impact.
A number of corporations are working to address this issue through initiatives like electric vehicle (EV) development. Car manufacturers are increasingly gearing their production towards EVs and collaborating to build recharging networks nationwide.
Emerging companies are developing more sophisticated hardware and software to power these vehicles more efficiently. Further, policy is evolving to support manufacturing transitions away from internal combustion and towards electric, to encourage consumers to buy electric and to expand the recharging system further.
Coming in just behind transportation is the electricity sector, responsible for 25% of 2021 GHG emissions.[ii] In fact, 79% of US electricity comes from burning fossil fuels like coal and natural gas.[iii]
Developing and scaling renewable energy resources is a challenge we’ve been tackling for years, and there continues to be innovation and improvements in this space.
The flooding, hurricanes, and intensifying storms we’re increasingly seeing across the US have a myriad of devastating impacts. But one of the most pervasive is the repercussions on our aging water infrastructure. The systems put in place in the 1960s were neither designed for our current population level nor the massive amounts of runoff we’re witnessing.
We’re seeing new sensor technologies come into play to help utilities detect leaks or measure flow rates to divert waste away from contaminating water bodies. Others use microbiology innovations in wastewater plants to purify better and expand access to potable drinking water.
How to Invest to Fight Climate Change
The ways you actually deploy your capital to align with your values can vary, but it starts with knowing where you’re currently investing. Ideally, you could work with an investor to review your portfolio and understand how your capital is working for you.
A qualified investment manager can help you understand the sustainability data a company discloses and its overall trajectory for improving practices or spurring critical innovation. Additionally, some investors actively encourage companies to make more sustainable changes in their operations through letter writing and the proxy process. For more on how this process can work – check out one of our recent blogs, Proxy Voting and Working as an Active Shareholder.
If you’re eligible, you may also consider impact investing, a more direct way to invest in novel ideas and support emerging entrepreneurs whose ideas positively impact the world, though typically on a smaller scale than large public companies.
Your capital can mirror your values. If you’re making daily choices to be more sustainable, it is worth considering if your investments are doing the same.
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[i] Sources of Greenhouse Gas Emissions, EPA, 2021, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions.
[ii] Sources of Greenhouse Gas Emissions, EPA, 2021, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions.
[iii] Sources of Greenhouse Gas Emissions, EPA, 2021, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions.