Leading financial services firm, Credit Suisse Group has shared a different perspective towards investors who are eagerly withdrawing their investments in firms that are actively contributing to increasing their carbon footprint.
In its latest report, Credit Suisse has opined that reducing an investment portfolio’s carbon footprint doesn’t necessarily lead to lower greenhouse gas emissions.
Mr. James Gifford, Head of Impact Advisory at the financial institution remarked that “Decarbonising your portfolio isn’t the same as building a portfolio that helps to decarbonize the world.”
Mr. Gifford elaborated that some firms like a wind-turbine manufacturer may have a high-carbon footprint created out of its production, the end product, the wind-turbine, is a key component of global efforts to reduce the dependence on fossil fuels. The Credit Suisse official points out that investing in a low-carbon company in a sector with a comparatively small footprint, such as media, will have a very limited impact on climate change.
Discussions surrounding investments in high-carbon footprint organization has taken center stage as climate change, once considered as a distant threat has become one of the defining factors for investment bankers as investors, regulators and activists continue to push for investments which directly contribute to a greener future.
The Credit Suisse report states that while offloading carbon-intensive holdings could seem like a quick way to dodge criticism, it eventually leads to reduced control of investors to influence corporate polluters.
In the report, Mr. Gifford emphasizes that stakeholders should “not only consider how to reduce exposure to carbon in their portfolios and ensure their portfolios are aligned with a low-carbon future, but also explore whether their portfolios are actually contributing to solving the climate challenge.”
The Credit Suisse official pointed out that investors can have the biggest impact on companies either when they help fund their early-stage growth in private markets or when they proactively engage with publicly traded companies.
Mr. Gifford stated that while large corporations have dedicated in-house teams to work on sustainability and environmental issues, small- and mid-cap companies and firms in the emerging markets can be significantly influenced by their investors.
“If you sell out of companies that face climate risks, it is no longer possible to engage with them,” Gifford replied while adding that “Many investors want to stay diversified and so they will remain invested in some sectors that face climate risks and help drive the transition through engagement.”
