The world is changing. Investors can no longer look to existing strategies and indexes – clearly representative of the “old” economy – to be sufficient during the current transition towards the “new”. This is especially true regarding environmental issues in light of the Paris Agreement, the recent UN Sustainable Development Goals becoming standard for investment strategy assessments, and increasing public and regulatory pressure.
Over the past year for instance, the French Article 173 has required investors to report on the non-financial impacts of their investments. The notion of fiduciary duty is being questioned because it does not (yet) include environmental, social, and governance risks. The public, made up of none other than final investors, is becoming increasingly exigent in its calls for action to combat climate change. No matter whether rooted in a moral calling to protect the environment or a desire to avoid the risks associated with this economic transition, it is time for institutional investors to look at the ESG impacts of their investments.
The trajectory is clear. But, before setting a goalpost, it is important to assess the starting point; a robust and reliable carbon footprinting methodology serves as the basic tool for assessing and improving climate impact.
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