Big investment houses are often criticised for being the epicentre of unsustainable financial practices. This perspective ignores the efforts that several organisations are making to develop more sustainable models, as Simon Leadbetter discovered when he hosted a UBS discussion on philanthropy, socially responsible investment (SRI) and corporate social responsibility (CSR).
Founded in 1856, how UBS thinks about SRI matters. It operates in 50 countries and has around $1.7 trillion (£1.1 trillion) in invested assets – £150 billion of which are invested sustainably. It is the largest manager of private wealth assets in the world, according to research by the Scorpio Partnership.
UBS is a signatory to UN-backed Principles for Responsible Investment (PRI), the UK Sustainable Investment and Finance Association (UKSIF) and the Financial Reporting Council’s (FRC) UK Stewardship Code.
The discussion, which is available online here, explored how UBS defines SRI and the relevance of this type of investment to the charity sector. Harry Pope, who is a member of UBS’s charity team, gave a textbook response on how smart investment balances the financial outcomes with the environmental and social.
He argued that this is of particular relevance to charities as they cannot afford the reputational risk of investing in a company that acts in a way contrary to the charities’ aims. He also made the point that supporters of charities expect them to be at the forefront of responsible and ethical investment as it is core to their function in society.
Agathe Bolli, of the environment, social and corporate governance (ESG) advisory team at UBS, explained the difference between negative and positive screening and its relevance to difference investors. The negative screening is useful for those who have an objection to a specific activity such as tobacco, gambling or arms sales, which, might be of particular relevance to a charity. Positive screening is useful to those who wish to support certain sustainable industries such as cleantech or renewables.
In reality, there is neither a best or worst way of investing as most investors adopt a blend of both negative and positive screening to reflect their values and required investment outcomes. UBS calls this values-based investing (VBI).
Certainly, there are trade-offs and compromises to be made in conventional fund investing but these can be minimised with the right advice and planning. Purists may look to social investment or crowdfunding social projects and this is a rapidly growing area, but for many, the conventional fund route represents the best entry point for SRI.
UBS launched its first global SRI fund in 1997, so has a 15 years track record in understanding this sector. The ESG team in Switzerland, of which Bolli is a part, plays a key role in informing fund managers, wealth managers and investors of the potential risks of unethical, socially irresponsible investment. As with all financial institutions, UBS is not about pushing one investment approach but to closely align the investors’ values and requirements with what they invest in.
Strong trends are emerging for charities in SRI. UBS reports many trustees are starting to engage with the issue and looking at how their mandate can be adjusted to reflect this growing awareness. Pope pointed out that there is a significant role for education as many trustees do not make the connection between what they invest in and how that might negatively impact the reputation or work of the charity.
The Charity Commission has issued guidance that charities can include ethical and social considerations in their investment decisions rather than the outdated concept that their role is to simply maximise return. The clarification of fiduciary responsibilities will provide a significant stimulus to those trustees that see unsustainable investment running contrary to the aims of the charity they work for.
Bolli pointed out that the stricter the criteria for investing ,the more limited the universe is for investment. While this does not necessarily have to impact performance, it may. Equally, not including sustainable stocks may lead to unpleasant surprises such as BP’s Deepwater Horizon incident.
Pope made the point that it is often an individual who understands SRI who drives the change in a charity. Paddy Lewis, head of investment management in the UK at UBS, made the analogy that it has now become socially unacceptable not to recycle and it will become the case that is socially unacceptable to invest unsustainably. This new norm is starting to be established as more environmentally aware, socially conscious and digitally connected investors enter the market.
Meanwhile Nick Wright, head of community affairs and CSR, pointed out they are increasingly finding new recruits look at the CSR and ESG policies of the investment banks they are looking to join and for UBS, it is one of the most visited pages for potential candidates on its website. To attract the best, its commitment needs to be genuine, led from the top and adopted across the organisation.
Wright also discussed how UBS is launching a donor advised foundation which will allow wealthy clients to donate via the foundation with none of the back end administrative costs and hassle. The aim is to allow clients to achieve their philanthropic aims as easily as possible.
As one of the world’s largest financial organisations, UBS has had its fair share of controversies, but is clearly a frontrunner in global sustainable finance and investment.
In 2010, the organisation issued a new CSR code. Chairman Kaspar Villiger and former CEO Oswald J Grubel described the code as “an integral part of changing the way UBS conducts business.” The eight-page code addresses financial crime, competition, confidentiality, human rights and environmental issues. It also lays out potential sanctions against employees who violate it, such as warnings, demotions, or dismissal.
All the panellists felt that the industry were moving in the right direction and the team actively encourage their wealth management team to talk to clients about considering ESG issues in their investing. Not every investor is receptive, but this doesn’t stop UBS raising the approach.
Will Self-Driving Cars Be Better for the Environment?
Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?
But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?
The Big Picture
The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.
That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.
One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.
There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.
As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.
Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.
Make and Model of Car
Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.
On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.
The Bottom Line
Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?
Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.
New Zealand to Switch to Fully Renewable Energy by 2035
New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.
New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.
Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.
Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”
The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.
Zero net emissions by 2050
Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.
Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.
She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.
Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”
A worldwide shift to renewable energy
Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.
Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.
Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.
Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.
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