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Impact investing Reading time: 2 mins

Tackling the climate crisis: how responsible investment can help

22 Feb 2020

“The global investment community is ready to embrace renewable energy, and there’s an opportunity for companies like Octopus to encourage large institutions to make greater investments into wind and solar in particular.” That’s the view of Kat Shenton, recently appointed Impact and Sustainability Director at Octopus.

Below, Kat shares more of her thoughts on how responsible investment can help combat climate change.

Government response

According to analysis published by the Principles of Responsible Investment (PRI) at their conference last year, governments looking to tackle climate change are still falling significantly short of the commitments made under the Paris Agreement. As the realities of climate change become increasingly apparent, governments will be forced to act more decisively.

The greater the delay in responding, the greater the potential cost. The question for investors now is not if governments will act but when they will do so, what policies they will use, and where the impact will be felt.

The PRI also forecast an Inevitable Policy Response in 2023-2025 that will be forceful, abrupt, and disorderly because of the delay. In other words, we can expect a chaotic policy “panic” as policymakers attempt to catch up and deliver sufficient carbon reductions to save the world, literally.

Investor activism to help save the planet

There is an onus, both moral and fiduciary, to use investor influence to save the planet. It would be difficult to see how the world will cap emissions in line with the Paris agreement without asset owners driving change, aligning their portfolios to ‘net zero’ and demanding more from their asset managers.

Insight and analysis

It’s clear the global investment community is ready to invest into renewable energy as part of wider investment strategies. The world is ready to reap a trillion-dollar renewable energy windfall (or “gigafall”); renewable electricity from solar and wind now costs less than electricity generated from gas and coal and renewables can be easily implemented at a huge scale. 

Despite this, there is still a perception among investors that investing in climate change mitigation comes at the cost of returns. Companies like Octopus have an opportunity to demonstrate to large institutional funds that – at the same time as clearly and demonstrably mitigating climate change – investing in renewables can also deliver an attractive risk-adjusted return. Plus, it can provide a natural hedge to risks carried in the wider portfolio. Not only can we help such institutions move towards ‘net zero’ funds, but we can also create ‘impact opportunities’ that drive countries, cities and regions to become net zero.

Despite the clear and present business case for renewable energy assets, no-one within the industry can afford to be complacent. A delegate at the PRI Paris conference summed it up nicely by saying, “We are all facing climate change, and we all need to act. There is strength in numbers”.