- Insufficient to only allocate capital based on environmental responsibility scoring systems
- Innovations into technologies that reduce energy & carbon intensity are needed
- As many innovations are nascent, private capital providers are well-placed to support
- Exposure to emerging decarbonisation tech via private asset funds offers investment opportunities
- Investors can make meaningful impact while generating attractive returns
Green investing needs an overhaul. With the promulgation of green narratives, the investing world today boasts no shortage of channels to facilitate deploying capital in an environmentally friendly manner. Scores that appraise environmental responsibility are now recognised as a mainstay of investing, and the number of equity funds classified as social responsible investing/environmental, social, and governance (SRI/ESG) has ballooned tenfold since a decade ago.
Although investors may be eager to jump onto the green investing bandwagon, it is difficult to rid oneself of the nagging scepticism about whether capital allocation based on such scoring systems alone can bring about the impact needed to achieve our climate goals. The truth is that while stellar ratings suggest that a company may have been relatively responsible in mitigating its negative externalities, simply being “less bad” does not necessarily imply a path of progress.
As with all forms of human progress, innovation is indispensable. Decades of a “growth at all costs” mentality without considering the environmental ramifications have brought us to where we are today – faced with a looming climate catastrophe threatening the very existence of our species. Yet reversing this millennia-old positive correlation between gross domestic product (GDP) growth and carbon emissions cannot be achieved just through a simple revision of capital allocation practices within existing corporations alone. This formidable task requires a thorough overhaul of our economic modus operandi, achievable only through disruptive, avant-garde solutions. Fortunately, many such solutions are already under development, and are ripe for the picking of far-sighted investors who wish to be early adopters in the foundations of a more climate-friendly world.
The private market edge – Invest in the foundations of a low-carbon world. The opportunity to supercharge these solutions gives investors the chance to build the carbon-neutral world of our future. Given the nascence of many such disruptive technologies, private capital providers are best suited to partner in their development. From an investor’s perspective, gaining exposure to emerging decarbonisation technologies via private asset funds delivers the best of both worlds – the opportunity to make meaningful impact, while generating attractive returns from doing so.
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