How Your Investments Can Make An Impact on Climate Change

By Hightower Bethesda on May 30, 2023

An interview with Impax Asset Management highlighting the current landscape and opportunities:

If you worry about climate change, you are in good company. A median 75% of respondents across 19 countries in North America, Europe and the Asia-Pacific region surveyed by the Pew Research Center label global climate change as a major threat to their country.[i]

If you are among this group of concerned citizens, you may also feel a sense of urgency to address the issue and wonder how you can make a positive impact — including with your investment portfolio. 

To help those interested understand the current landscape for investing to combat climate change, we spoke with Jen Cannon from Impax Asset Management, an investment firm focused on the risks and opportunities arising from the transition to a more sustainable global economy. 

Q: Why has climate change become such an important issue for investors?

Jen Cannon: In 1990, the Intergovernmental Panel on Climate Change (IPCC) released its first report underlining the global consequences of climate change, so many millennial and Gen Z investors have spent the majority of their lives understanding the impact of human activities on the climate. It’s a message that continues to be reinforced, from Earth Day campaigns for planting trees to cultural campaigns telling us to “Reduce, Reuse, Recycle” and “Go green.”

Target dates for limiting carbon emissions to avoid climate catastrophe are well within these younger investors’ expected lifetimes. And they have experienced the increase in weather-related disasters firsthand, with droughts, floods, fires and severe storms dominating the news cycles. In fact, in 2022 alone, the National Oceanic and Atmospheric Administration counted 18 weather- or climate-related disasters that each caused more than $1 billion in losses in the U.S. Total losses for the year topped $169 billion.[ii]

An increasing number of these investors understand that the time to act is now — and that their investments can make an impact on important global issues like climate change.

Q. How can companies work to address climate change?

JC: Companies can address climate change on two fronts: mitigating impacts that contribute to climate change and adapting to a climate that has already changed and will continue to do so.

Mitigation can include reducing greenhouse gas emissions and managing resources efficiently, and it’s not limited to any sector or type of company. Lower-emissions companies provide products or services that are less carbon-intensive than conventional alternatives. From water to electricity, better resource management can also help mitigate climate impact.

Companies focused on primary adaptation work to address the immediate impacts of climate change, like stronger storms, higher sea levels and extreme heat. Examples include securing energy infrastructure and reducing the impacts of flooding and storm surges.

Secondary adaptation includes issues that arise from climate change, like health care solutions to address the increased spread of vector-borne diseases, business continuity solutions, and financial products and services tailored to losses from extreme weather events.

Q: What kinds of companies provide investment opportunities that support the environment?

JC: Examples include investments in areas such as alternative energy and energy efficiency, clean and efficient transport solutions, sustainable food and agriculture, water infrastructure and technologies, and resource efficiency and waste management.

One example of a clean and efficient transport solution is automotive parts suppliers for electric vehicles (EVs) and autonomous driving. The shift to electrified powertrains, driven by regulation, declining costs and increased consumer choice, is leading to continued growth for companies in EV supply chains.

The sustainable food and agriculture category includes companies that manufacture ingredients like vitamins and nutraceuticals, which then impact livestock health and efficacy of feed. That leads to lower input-related waste, emissions and harmful byproduct cultivation — some of the negative environmental impacts of modern agriculture practices.

When it comes to resource efficiency, companies that use technology to measure, analyze and manage operations in real time can help optimize energy efficiency and infrastructure performance, whether in the context of industrial automation, commercial building management, smart homes, smart grids or data centers. Companies across multiple industries can use technology to improve efficiency and decrease costs, supporting long-term growth.

Overall, we believe capital markets will be shaped profoundly by global sustainability challenges; these trends will drive growth for well-positioned companies and create risks for those unable or unwilling to adapt.

Q: How can we measure an investment’s impact?

JC: A number of asset management firms have started producing reporting that goes beyond financial performance.

Examples include portfolios’ CO2 emissions avoided, water provided/saved/treated, renewable energy generated, and materials recovered or waste treated.

Asset managers can also engage with their investee companies on climate-related topics, including emissions reduction, physical climate risk and climate adaptation. This engagement can help encourage companies to hone their management of and transparency around climate-related risks.

Q: What should an investor do if they want to invest in climate solutions?

JC: Take the first step: If climate change is an issue you care about, talk to your advisor about investing in climate-friendly strategies. Tell them you would like to work with an experienced asset manager to make an impact with your investments.

Disclosure

Hightower Bethesda is a group comprised of investment professionals registered with Hightower Advisors, LLC, an

SEC registered investment adviser. Some investment professionals may also be registered with Hightower

Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities

are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process

is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced

herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment

opportunities referenced herein may not be suitable for all investors. All data or other information referenced

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[i] Fagan, Moira, Sneha Gubbala and Jacob Poushter, “Climate Change Remains Top Global Threat Across 19-Country Survey,” Pew Research Center, August 31, 2022.

[ii] National Centers for Environmental Information, https://www.ncei.noaa.gov/access/billions/. Accessed April 4, 2023.