Explore the Thinking behind our investment approach

Efficiently moving private capital into climate-focused solutions is often not the simplest of matters. According to Stephan Nicoleau, Managing Director of FullCycle, about 25% of currently available sustainable solutions receive about 80% of available private capital, leaving the remaining 75% of solutions competing for very limited financial resources. [1] In today’s episode of The Great Repricing, Jeff talks with Stephan about the inefficiency of the private markets and the role Stephan believes both the government and the private sector can play in helping to ensure that capital finds its way to a wider spectrum of solutions:

Over the long term, we believe that companies and assets facing significant climate risk will price down and those that offer solutions for decarbonization or adaptation will outperform. However, we expect a bumpy road ahead. Climate investment risk often is expressed in terms of stranded assets, notably those related to fossil fuels. Research shows that most oil, gas, and coal reserves will be stranded as world economies phase in renewables and other lower carbon energy sources.[1] This is expected to, over the longer term, adversely impact the balance sheets of fossil fuel majors. Oil prices currently are trending upward, but this is a function of short-term supply/demand imbalances and geopolitical risks outweighing the longer-term necessity of shifting energy to renewables. All of this could result in a more abrupt transition down the road. As the London-based think tank Carbon Tracker states in a recent letter to the U.S. Securities and Exchange Commission, oil and gas firms have made net zero by 2050 pledges, but “very few companies reveal whether the prices they use to evaluate oil and gas reserves or test the value of their fixed assets for impairment align with such targets or consider climate-related risks at all.”[2] Across sectors, companies insufficiently focused on how climate change will impact operations are likely to lose market share, revenues, and profitability. As climate disclosures are mandated, increasing data availability will allow for deeper analysis of company strategies. Our goal is to encourage advisors and investors to take action to integrate climate change considerations into investment decisions and to align portfolio goals with both profits and the planet. With this in mind, please check out our feature article in the most recent publication of Investments & Wealth Monitor, adapted from our longer paper, The Great Repricing: Financial Advice in the Age of Climate Change, and published by the Investment & Wealth Institute.

Individual investor access to climate focused investments in the venture capital space is generally not so easy to find. Footprint Coalition Ventures, founded by Jonathan Schulhof, Robert Downey Jr., and Steve Levin, is a sustainable technology and investment community platform directed towards opening up access to investments in climate. Their unique model produces media and content across a variety of formats and distribution platforms in order to draw more attention to climate issues and build community awareness around companies that are driving change. This week, Jeff sat down with Jonathan Schulhof to discuss Footprint Coalition Ventures and how they are making VC climate-focused investing more accessible to individual investors:

An increasing number of asset managers are hiring climate scientists to do research, as it is very difficult to separate climate-focused investment strategies from climate risk science and data. In this week’s edition of The Great Repricing, Jeff sits down with Dr. Kimberley R. Miner, a climate risk scientist at the NASA Jet Propulsion Lab and Assistant Professor at the University of Maine’s Climate Change Institute. Dr. Miner offers her perspective on a variety of topics, including her work and research in the Arctic Poles, why the capital markets should be concerned about climate change, and the accuracy of scientific climate forecasting. Noting that the effects of climate change are interrelated around the globe, Dr. Miner emphasizes that the commodities market is pricing out earth systems and that everything in the market is intrinsically tied to what occurs on the planet.

In our conversations, experts who’ve been working in the ESG and climate investing industry for years often comment on how the level of information and new insights can be overwhelming. Prioritizing time to learn can also be a challenge for a busy advisor. Moreover, the trade-offs and complexities associated with mitigating and adapting to climate change should not be underestimated. As an industry and as a global society, we are going to make mistakes along the way, as learning is a continual process. In this week’s edition of The Great Repricing, Jeff offers a brief editorial speaking to what he feels is the essence of ESG and climate-focused investing, particularly in response to some of the political criticisms that we have been seeing recently in the media. ESG, he argues, is not about choosing one political party’s values over another, but rather is about looking for value in the companies we are investing in within the ever-changing landscape and environment that we find ourselves:

Buildings generate nearly 40% of annual CO2 emissions. [1] Despite being the #1 contributor to greenhouse and carbon emissions, the built environment is often overlooked as a significant contributor. In this segment of The Great Repricing, Jeff speaks with John Williams of Autocase about streamlining the decarbonization of the built environment by using cloud-based computing to automate lifecycle costs, carbon analysis, and cost benefits for specific buildings. What historically took months and thousands of dollars to measure can now be automated at a fraction of the cost through Autocase’s software. This scientific process allows for more transparency and better building design to reach net-zero commitments and address society’s need for healthier living spaces along with commercial resilience.