When investors are looking for the biggest long-term returns, they’re usually most interested in robust industries and ideas that will generate cash flow – but a new generation of investors are also prioritising how business ventures are building their environmental credentials.
Environmental issues and climate change policies have always generated impassioned responses because of their far-reaching impact, and consequently investors now feel they are important indicators of how a business conducts itself, according to Dr Rebecca Huntley, an independent consultant speaking on behalf of Australian Ethical in a recent podcast with InvestorDaily.
“For younger and engaged investors who are looking for investments that are going to pay off in the long term, they're applying the values that they have,” Dr Huntley said.
“If we look at the research about the attitudes of younger Australians in particular to climate change, the vast majority of them are either alarmed about climate change or highly concerned – so there's a real generational skew there.”
Dr Huntley said that thinking about the environment and climate change is “almost something that is natural” for anyone under 35 considering investing.
She cited Australian billionaire investors like mining magnate Andrew Forrest and Atlassian CEO Michael Cannon-Brookes as being at the forefront of creating opportunities for Australian investors in renewable energy technologies.
But despite the fast growing and emerging interest in ESG and renewable technology from younger investors and more generally among businesses, Dr Huntley feels that Australia is still only in its early stages of ESG maturity. She believes the federal government is the culprit “that’s holding us back”.
“That being said, there's a growing understanding from the public's point of view, that business is just getting on with it. They are making commitments around things like, net zero around reducing waste,” Dr Huntley said.
Eager to put to rest the stereotypes of environmentally aloof businesses, she said it’s “not necessarily true” that businesses are “all about the money” and “just being conservative”.
She also took aim at the federal government for failing to demonstrate how it will allocate funding to speed up the implementation of renewable technologies by weaning coal and gas off public subsidies in a way that works for large and small businesses.
“We're starting to see that more at the state level, but we need to see it more at the federal level as well – we've still got about a 100 coal and gas projects on the books ready to be in theory, greenlighted by the government,” Dr Huntley said.
When placed into a global context and how quickly things can change, Dr Huntley warned that something that looks like a viable investment today may not be in three or four years.
“I think the whole landscape around investment in fossil fuels versus renewable energy is changing quickly despite the federal context. It just can't continue to stall after a certain point,” Dr Huntley said.
She advised, however, that people feeling powerless in the face of climate change or feeling that their vote isn’t necessarily the most effective way to express their concerns for the climate, can take action more laterally.
“You can think smart about what you do with your money, and in a way that's not going to disadvantage you financially, but is going to send a huge message through that system,” she said.
She also said people can raise environmental issues within their workplaces, and ask what can be done about being a net-zero business, communicating with providers and supply chains.
“As an employee, you can be an effective advocate as well around that,” Dr Huntley said.
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