Climate investing tools can battle injustice

Green Daily
Bloomberg

In climate news today...

Emily Chasan's Good Business

In the span of only a few months, systemic issues once considered exogenous to markets have become the financial world's main focus. From public health to structural inequality and the long-term battle against climate change, solving broader problems has never been more central to moving the economy forward. 

While investors have been pushing companies to disclose and address climate risk, most companies have been caught flat-footed around both the pandemic and recent racial justice issues. And executives have just started to see the links between all three, like the negative health outcomes for minority communities near coal-fired power plants, for example. 

"Corporations must recognize that their current efforts to promote their core values, and diversity and inclusion programs, fall far short of what is needed today," said John Streur, chief executive of Calvert Research and Management, Eaton Vance's $21.3 billion responsible-investment unit.

Companies are making the same mistake when it comes to people and the planet, said Rachel Robasciotti, founder of investment firm Robasciotti & Philipson in San Francisco. They are extracting "the maximum possible for an individual or company's gain, rather than for sustainability."

Divestment

For investors, the first stage of thinking about climate is often reducing exposure to fossil fuels. More than $11 trillion in assets have now been committed to divesting from that sector, according to 350.org. There has yet to be the same commitment to removing institutions that propagate racial inequality, said Robasciotti, who published a list of companies this week she contends contribute to racial injustice, from for-profit education companies to firms that work with, or own, for-profit prisons. "With divestment you are directly impacting executive compensation and their cost of capital," she said, "but we haven't had solidarity on racial justice divestment as an industry since apartheid," she said. 

Corporate Boards

Achieving diversity on corporate boards also has a long way to go. While every company in the S&P 500 now has a woman on the board, that hasn't been fully replicated in terms of racial diversity. Only about 10% of the Russell 3000 index has ethnically diverse board members

And while climate risk and opportunity will affect most companies in the years to come, a Bloomberg Green review of board members at the world's largest banks found just a handful of those directors have any direct clean energy experience. 

Disclosure

Measuring climate risk in order to manage it has been a key demand by climate-focused investors, but calls for more disclosure about workforce structure, safety and diversity have not. "Less than 40% of companies are even transparent about the racial and gender makeup of their workforce," said Martin Whittaker, CEO of JUST Capital in New York. "If you don't have the data to know if you are even biased against people of color in your workforce in terms of pay and benefits, then it's going to be very difficult to do anything about it."

Supply chain is another area where companies and investors have small but steady programs focusing on health, safety and equality issues, such as minority supplier programs or conflict minerals disclosure. Those programs could be made bigger and more effective.

The Bond Market

Long-dated bonds are seen as a potential funding solution for systemic injustice issues, from affordable housing to municipal education. Scale is crucial, however, because the scope of inequality, like the pandemic and the climate crisis, is vast. Coronavirus bonds have taken off, reaching about $163.5 billion in dedicated financing, according to BloombergNEF. But that's just a fraction of the more than $1 trillion green debt market, though. The scale of racial justice-focused firms can be quite small, too. In the past few weeks, for example, a $1 million fund was created to back African tech firms and a $2.2 million venture fund was begun to support black company founders. The market for social impact bonds that aim to address inequality issues like prison recidivism, educational opportunity and obesity has grown to about $370 million over the last decade, according to Brookings.

But there is a long way to go.

Sustainable Finance In Brief

Emily Chasan writes the Good Business newsletter about climate-conscious investors and the frontiers of sustainability.

Here's what else you need to know in Green

Drought Could Make North Africa the World's Top Wheat Buyer 
The region is suffering one of the worst droughts in four decades.
Britain Goes Record Two Months Without Coal Power Generation
It's the longest stretch without the dirtiest fossil fuel since the start of the Industrial Revolution.
Everyone Is Ditching Coal Quicker — Except Asia
It's a tale of two hemispheres: The U.S. and Europe cut back while appetite grows in China and India.
How to Grow Green 
Twenty-six ways to launch a clean energy future post-pandemic.

Comments

Popular posts from this blog

अब शूटिंग सेट पर जा सकेंगे 65 साल से अधिक उम्र के टीवी और फिल्म एक्टर्स, बॉम्बे हाई कोर्ट ने महाराष्ट्र सरकार द्वारा लगाए प्रतिबंध को हटाया

What type of wireless headphones are best for movies watching?

Chicken vs. cow