This negative framing of the climate question is evident in many investors. Yet it’s often even more apparent in companies, for whom addressing carbon emissions can be a clear priority in times of plenty, but as soon as either company specific or broader economic headwinds emerge, the issue can quickly become a ‘tug of war’ between sustainability and finance teams – with a CEO and board stuck in the middle. 

However, it is our firm belief that instead of framing the challenges and opportunities of the energy transition in these terms, investors and companies could be asking a different, more positive question: how can these opportunities and risks be addressed simultaneously?

In fact, we believe that addressing the opportunities and risks created by the energy transition to help target a positive impact on climate outcomes can be closely aligned with a focus on long-term returns. However, far from maximising the potential value created by the transition, many companies are still failing to transition at an optimal pace.

It’s the combination of the false framing of the climate question and the slow transition progress of many companies that, in our view, create such a significant opportunity for active investors to have both a positive impact on climate outcomes and also target returns. On the one hand, many still misunderstand the fundamentally economic nature of decarbonisation – leading to the possibility of material mispricing for investors to take advantage of; on the other hand there is a window of opportunity for investors to engage with and positively influence those companies who continue to underperform their real climate potential.

Read the full ‘Sponsored Commentary’ now at the link below