The importance of patient capital behind cleantech is where the true value of impact investing lies
Date published: Friday, 8 September 2023
"The move out of ESG funds has gathered pace in a remarkable reversal after the boom in recent years. Four months of outflows signal a new trend emerging that fund houses will have to work hard to counteract" according to Calastone.
There is no doubt that many equity investors have switched to “safe haven” investments in cash-based products in recent months, oil and gas stocks have delivered good financial returns over the past year and there is considerable and legitimate concern around “greenwashing” of ESG products, to name but three factors.
But before we start writing ESG investing off, we should remind ourselves of the following. Firstly, the market doesn’t always get things right. The market is causing issues like climate change and biodiversity loss to worsen rather than improve. These issues largely remain economic externalities so market flows may ignore these economically impactful issues. Why would we think that the market is calling things correctly? Based on scientific analysis, we need more rather than less environmental and socially focused investment – and rather than being on the wane, well-managed sustainable investment appears to be on the “right side of history”.
In the words of Prof. Colin Mayer, Lead Author of the “Future of the Corporation” report (https://lnkd.in/ecWxXNyE) we need more businesses “Producing profitable solutions from the problems of people and planet, and not profiting from creating problems.” Perhaps one day the market will factor that into its analysis. At Earth Capital Ltd we already are.
- Richard Burrett, Chief Sustainability Officer