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Why we’re supporting Sustainable September: Alliance Trust Investments

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Several organisations are helping us organise and underwrite Sustainable September, the month-long celebration of sustainability that you can reserve your tickets for now, before they go on general sale.

We are asking each of them to tell us why they are supporting the event. Next is Alliance Trust Investments, which manages a range of investment funds under the banner Sustainable Future.

Why is Alliance Trust supporting Sustainable September? 

It has become clear that one of the main contributors to the financial crisis was a culture of short-term thinking, from which we are only just starting to recover. It led to pressure on companies to focus solely on short-term shareholder value, sometimes at the expense of other stakeholders (such as customers or broader society) and putting at risk longer-term returns.

Sustainable investors have long known that it is important to take into account more than just the immediate context of a company’s quarterly results. Increasingly, more people are coming to realise that the environmental, social and governance (ESG) issues are not just about ideals – they are about value as well. You only need to consider the recent floods in the UK, the furore over how much company bosses get paid or the fallout from last year’s horsemeat scandal to realise that these ESG factors can have a serious impact on the profits of the companies in which you invest.

Sustainable September is there to highlight the importance of these issues, with valuable insights from thought leaders, investors, corporations and entrepreneurs from across the country. As a company, Alliance Trust wants to be at the forefront of this movement towards a more sustainable future.

What do you hope to get out of the event?  

We hope that Sustainable September will push sustainability to the front of people’s minds and help to take a step toward changing people’s perceptions, particularly in relation to sustainable investing.

Currently, the most popular criticism of sustainable investing is that it means sacrificing returns. This is increasingly becoming untenable; indeed, Moneyfacts pointed out last year that ethical funds have outperformed their non-ethical counterparts over one year and three years, while sustainability issues are becoming more and more embedded in mainstream investment.

The factors that have brought this about are only going to become more important in the years to come, meaning that companies that operate more sustainably will be better investments in the long-term than those that don’t. It seems clear that sustainable investing is here to stay.

What does sustainability mean to you? 

We believe that there are three key elements encompassed within sustainability.

– Positive impact – there are many companies which are a real force for good. They help to improve quality of life, reduce environmental impact and manage their operations responsibly and with integrity. It may be a firm that makes technologies that lower carbon emissions, one that improves people’s lives through medical innovation or one that helps provide clean water. Companies with products or services that provide these solutions to the challenge of developing more sustainability are likely to grow more than the market and where these positive attributes are overlooked by the market can be good investments.

– Avoiding negatives – sustainable investing means not investing in companies whose activities damage the environment or have a negative social impact. As well as avoiding such firms, we believe that actively encouraging companies to change and improve their practices is an important part of sustainable and responsible investment (SRI). This process is called ‘engagement’.

– Real investment potential – we firmly believe that sustainable investing is a sensible approach from a pure investment perspective. Companies operating in a sustainable and responsible manner are better placed to succeed over the long-term.

Why should individuals and businesses consider sustainability?

There are a whole host of different factors making it more important for investors to take sustainability issues into account. As the world economy becomes increasingly globalised, a growing population and an emerging middle class in developing economies, which is clamouring for the good things in life, are colliding with limits to growth including food shortages, resource scarcity and environmental degradation.

On top of this, we are all having to deal with the impacts of extreme weather events, whether that is droughts in prime crop-growing areas in the US and Eastern Europe or floods at home and across Europe. These are becoming more frequent and more intense, with scientists increasingly certain that man-made climate change is behind these alterations to our weather patterns.

At the same time, ‘top down’ pressures are occurring. These are pressures from the other end of the economic chain – from us as consumers. In our connected world, people are now more aware of the impacts of their own actions – and the impact of the companies whose products they buy.

And now, social media allows people to do something about it and hold companies to stricter standards than they have in the past. That means businesses that are perceived to be acting in an irresponsible manner will be punished for it – recent examples include the demise of the News of the World, forced to shut in the wake of phone hacking revelations, and BP, which is still suffering the after-effects of the oil spill at one of its wells in the Gulf of Mexico.

It’s not just consumers and investors who are more aware of all of these issues – politicians and regulators are, too. Companies and shareholders have to consider not just the factors highlighted above but also how regulators and policymakers deal with them.

Academic studies support the view that more sustainable companies are more likely to be successful. A recent paper from the Harvard Business Review found that “high sustainability firms outperform low sustainability firms in both stock market as well as accounting performnance“.

Follow Sustainable September on Twitter (@SustSept), Facebook (facebook.com/sustsept) and through the dedicated LinkedIn group.

Further reading:

Introducing: Sustainable September

What is Sustainable September?

Register now for Sustainable September 2014

 

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

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.

Driver Reduction?

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

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.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

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.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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