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Hermes: Carbon risk should be at the heart of investment strategy

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Hermes Investment Management, the £29.5 billion asset manager, has today published a report, Turning Down the Heat which focuses on the risks carbon poses to investment portfolios and outlines the four pillars of Hermes’ strategy to mitigate this risk.

Saker Nusseibeh (pictured), Chief Executive, Hermes Investment Management, said: “It is crucial that we create the right outcomes from our investment decisions – and the right outcomes on a 30-year time horizon are those that mitigate risk, including carbon risk. In just 20 years, if circumstances don’t change, we will already be approaching dangerous levels of warming. Reducing risk ensures better returns for our beneficiaries by minimizing potential expenditure incurred by negative factors later on. We also have a better chance of leaving to our children and our grandchildren a world they can live in.”

Awareness of carbon risk exposure in investment portfolios

The first step is to identify the risks, which is much easier than it used to be because the quality and quantity of data available has increased dramatically in recent years. As you do not manage what you don’t measure, the starting point has to be to assess your exposure to carbon intensive sectors and GHG emissions.

Integrating carbon risk in investment decisions.

When Hermes developed their carbon risk approach they realised that their portfolio managers already consider carbon risk through their wider awareness of risks and opportunities. Often, this approach is more implicit than explicit with managers citing factors related to carbon risk, such as tightening regulation, consumer expectations and political risk, as some of the reasons to avoid certain carbon-intensive sectors or companies in particular regions.

Managing and engaging to reduce carbon risk

Hermes prefer to manage carbon risk by using the power of direct management and engagement. In equities, environmental regulations indirectly affect the value of investments in many industries in ways that are hard to anticipate. In real estate, regulation affects investors more directly because they own and directly manage the assets. Moreover, occupiers are looking to occupy buildings with good energy efficiency credentials as part of their own sustainability policies. Finally Hermes have seen growing interest from asset owners and a clear desire to see Hermes are managing the risks around climate change.

For these reasons, Hermes integrate carbon and wider ESG-related risks across our real estate investments. The benefits of doing so include the added value that more sustainable properties deliver because these are the properties that tenants want. Hermes set, systematically monitor and report on carbon targets and performance in a programme of active management that has delivered continuous emission reductions and delivered value for occupiers. Since 2006 Hermes have overseen an average reduction in GHG emissions of 60% across a portfolio of 18 properties through a combination of refurbishment, active management and engaging with occupiers.

When talking to companies, the first step is to establish what you want to achieve through your engagement. It is about maximising the value of each individual investment in order to provide the best circumstances for long-term returns.

Advocating to promote market transformation

Nusseibeh continued: “We believe in advocacy and sharing best practice with fellow investors or other key stakeholders. As such, over the years, we have been actively engaged in sector organisations such as the PRI and UNEP-FI promoting a better understanding of responsible investment and how to integrate ESG into investment management.”

Engagement has focused on helping to shape capital markets for the benefit of all stakeholders. To enable Hermes to better manage carbon, water and pollution risk they engage with public policymakers to encourage transparent disclosure of resource use and carbon emissions, best practice approaches and methodologies as well as carbon-pricing mechanisms.

If the asset management industry is to integrate factors that cover a time period of 20-30 years into the investment decision-making processes, collaboration with peers, policy makers and sector organisations is critical. Where new challenges arise, Hermes believe in advocacy and sharing best practice with fellow investors or other key stakeholders.

Nusseibeh concluded: “There is an odd but prevalent view that the investment community sits somehow outside of what it invests in. But we are indigenous to the system. We do not merely observe from afar. Our actions, our beliefs and our investment decisions shape the system. There is still a long way for us to go in recognising that the economic system is not separate from society.

“Carbon risk cannot and should not be ignored. It is time that we in the investment industry help to address it.”

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Green Weddings Trend: Why 70% of Newlyweds Are Going Green

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A couple of months ago, my best friend got married to her new husband. They are both very eco-conscious people, so they decided to have a unique twist on their wedding. They asked for the following:

  • They arranged a carpool with their friends.
  • They didn’t have any balloons. Instead they used umbrellas.
  • They used plant materials instead of plastic confetti.
  • My friend insisted her husband not purchase a diamond. In addition to being ecologically conscious, she didn’t like the idea of having a stone that was used in conflict zones.

My friends aren’t the only ones making these changes. In fact, nearly a quarter of all newlyweds are organizing green weddings.

Green Weddings Are Becoming the Norm

People are more concerned about green living than ever before. They are trying to incorporate environmental protectionist ideas into every facet of their lives, even the most intimate, such as marriage. A growing number of people are trying to have green weddings, which can make a big difference in reducing their carbon footprint.

How much of a difference can this make? Here are some statistics to bear in mind:

There are a number ofreasons that green weddings are becoming more important. Here are a few.

People Are More Worried About Environmental Preservation than Ever Before

Green living in general is becoming a greater concern for most people. Even younger conservatives are breaking from their older counterparts by insisting on fighting climate change. According to a poll from Pew Research earlier this year, 75% of Americans say that they are very concerned about protecting the environment. Having green weddings is a good way to act on this concern.

One of the biggest changes people are making is using recycled products for their green weddings. This is explained by the research from Pew:

“Overall, 32% of U.S. adults say they are bothered a lot by people throwing away things that could be recycled. Roughly six-in-ten Americans (61%) who say they always try to live in ways that protect the environment say it bothers them “a lot” when others throw away things that could be recycled. Among those who are less focused on environmental protection, only a quarter say it bothers them a lot when others don’t recycle. People who are environmentally conscious are also twice as likely as others to say that seeing someone incorrectly putting trash in recycling bins bothers them a lot (42% vs. 21%).”

Indifferent Politicians Are Driving them to Take More Initiative

Many politicians in power have been very hesitant to take action on climate change. Many of them have openly stated that it is a hoax. These politicians are forcing people to do what they can in their own lives to make a difference. Making small changes, such as hosting green weddings, is a great way to improve the environment without waiting for political momentum.

Cost and Simplicity

A couple of the biggest reasons that people want to host green weddings have nothing to do with their concern for the environment. Running green weddings is simply cheaper and simpler than having a massive, traditional one. One of the biggest changes is that they are buying green engagement rings from the best brands.

Green Weddings Are the Future

Green weddings have become very popular over the past few years. They will probably account for close to 90% of all marriages by 2025. People that are planning to get married should look into the benefits and plan accordingly.

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Green Tech Start-Ups: Are they the Future?

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Endless innovations are occurring in green companies, reinventing the industries they belong to. Gradually, they are beginning to amass more success and popularity. Consequently, these factors serve as a good indicator for green technology businesses, and their development must begin somewhere.

Green tech start-ups boast a wide array of opportunities for the economy and environment, while boosting recruitment openings with valuable services. While the technology industry is littered with high revenues and competition, the green tech start-ups are the clear sign of a cleaner future.

Fulfilling a Genuine Need

Many tech companies will market themselves as the ultimate tech giants to shift stock and make profit. As they all vie for attention through warped corporate rhetoric, there is only one ethical winner; the start-up green tech company.

Some argue that mainstream tech businesses have grown far too big, branching out into other industries and standing between the consumer and practically everything they do. However, green tech start-ups go beyond the shallow ambitions of a company, answering a call to sincerely help the customer and climate in any way they can. Of course, this is an attractive business model, putting customers at ease as they contribute to a humanitarian cause that is genuine through and through.

After all, empathy is a striking trait to have in business, and green tech start-ups maintain this composure by their very nature and purpose.

Creating Opportunities

Despite the pursuits for clean energy still needing more awareness, green tech is an area that is ripe for contribution and expansion. There’s no need to copy another company or be a business of cheap knockoffs; green tech start-ups can add a new voice to the economy by being fresh, fearless and entrepreneurial.

Technology is at its most useful when it breaks new ground, an awe that eco-friendly innovations have by default in their operations. Of course, green tech start-ups have the chance to build on this foundation and create harmony instead of climate crisis. Ultimately, the tech advancements are what revolutionise clean energy as more than an activist niche, putting theory into practice.

Despite the US gradually becoming more disengaged with green technology, others such as China and Canada recognise the potential in green technology for creating jobs and growth in their respective economies. The slack of others spurs them on, which creates a constant influx of prospects for the green tech sector. Put simply, their services are always required, able to thrive from country to country.

A Fundamental Foresight

Mainstream technology can seem repetitive and dull, tinkering with what has come before rather than turning tech on its head. Since 2011, technology has been accused of stagnation, something which the internet and petty app services seem to disguise in short reaching ideas of creativity.

However, green tech start-ups aren’t just winging it, and operate with a roadmap of climate change in the years ahead to strategize accordingly. In other words, they aren’t simply looking to make a quick profit by sticking to a trend, but have the long-term future in mind. Consequently, the green tech start-up will be there from the very start, building up from the foundational level to only grow as more and more people inevitably go green.

They can additionally forecast their finances too, with the ability to access online platforms despite the differing levels of experience, keeping them in the loop. Consequently, with an eye for the future, green tech startups are the ones who will eventually usher in the new era.

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