Investments

Investments in Fossil Fuels – Is This Our Exit?


Alain E. Roch, MBA

President and CEO

Alain.Roch@bluebridge.caAs a corporation, Blue Bridge is “carbon-neutral” and has been certified “eco-responsible” by the Conseil des Industries Durables in 2018. As an eco-leader in Quebec’s financial sector, we have an obligation to question ourselves, and to educate our clients, about the impact of the investments that we offer. The general belief is that investments in eco-friendly activities are less profitable than those in more polluting energies, such as those produced using coal or oil.

In reality, as several recent scientific studies have shown, investments in eco-friendly economic activities have yielded returns that are at least equal to the average returns of companies associated with non-renewable energies. Moreover, following in the steps of the European Central Bank (ECB), a growing number of central banks are in the process of introducing eco-friendly investment programs.

Financial institutions, starting with pension funds and family offices, should evaluate climate risks and reorient their own investment choices accordingly, with the understanding that climate change could have an impact on the profitability of companies and on the price of their securities on the stock market.

Sustainable finance is no longer synonymous with utopia, but climate risks are still only marginally translated into economic and financial risks.

The last few years have seen a rapid growth in responsible investments or finance, particularly with the creation of the Environmental, Social, and Governance (ESG) indicators put in place by the UN. A bolder form of sustainable investing is to find companies that build a competitive advantage by making a specific sustainability goal central to the investment process. Unlike socially responsible investing, and ESG investing which mainly consists of excluding undesirable investments, Impact Investing aims to actively produce a measurable positive result.

Sustainable finance is now popular and is no longer synonymous with utopia.

Despite all this, the latest figures on the subject suggest that this tendency has not been embraced by the key players in the financial world. In fact, the recently published study Banking on Climate Change: chaos 2021 observed that in the five years since the Paris Agreement (2015), the 60 largest banks in the world have financed fossil fuels to the tune of $ 3.8 trillion. Frantic funding for fossil fuel extraction and infrastructure is fueling climate chaos and threatening the lives and livelihoods of millions of people.

There are several reasons for this, but it is clear that climate risks still only marginally translate into economic and financial risks. As such, we can only wonder what action plans are needed to bring about a real transformation in the financial world. First and foremost, it is necessary, more than ever, for politicians to take charge of these issues and require financial actors such as banks, family offices, and pension funds to disclose the climate risks associated with their investments. This practice, known as climaterelated financial disclosure, has been adopted by the British government, which has set up a commission for these matters.

 

A word to the wise!

 

References:

 

Banking on Climate Change: chaos 2021 : https://www.ran.org/bankingonclimatechaos2021

Les investissements “verts” font du bien à la finance de marché, Le Temps, March 18, 2019, Sergia Rossi.

Face aux évolutions internationales, la Suisse doit élaborer un plan d’action pour la finance durable, Le Temps, March 19, 2019, Adèle Thorens Goumaz.

Finance verte: entre mythe et réalité, Le Temps, March 21, 2019, Emilie Tricarico.

 

 

 

 

 

 

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By ALAIN E. ROCH, MBA

22/06/2021

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