Which of the following markets would you want your pension fund to have invested in in 2021? Would it be the one tracking the benchmark index, which has gained about 20%? Or would you prefer it to have bought the subindex that’s climbed by almost three times as much? It sounds obvious — until you dig into the detail.
Of course, this is a bit of a false dichotomy. If we continue to wreck the planet, there might not be anywhere left for you to enjoy those twilight years sipping margaritas, making the value of your nest egg a moot point. But it does illustrate that investment continues to flow into the world’s most polluting companies, leaving profits on the table for those willing to keep financing their activities.
That echoes the findings in a report published this week by UK think-tank New Financial: just 3% of European capital markets activity is by what it deems “good” ESG companies — those involved in solving environmental or social issues, such as wind or solar companies. That compares with 20% by “bad” companies, including oil and gas firms or those sanctioned by the ClimateAction 100+ list. And the picture is echoed globally and across several different capital markets sectors.
And “problems” is putting it mildly. The UN warned this week that the world will warm by 2.7°C by 2100 unless countries move more swiftly to curb their carbon emissions, leaving the 1.5°C target agreed in Paris six years ago a distant dream.