Adieu Paris. Business leaders putting their hands up to take responsibility. 

This weekend we saw Donald Trump make the decision to opt the US out of the Paris climate accord. A global, non-binding,  agreement to limit the increase in global temperatures to 2 degrees, aiming to safeguarding the future of the plant for today’s and future generations.  It initially took America under the leadership of Barak Obama to get all but two countries to sign the agreement.  The US now joins Syria and Nicaragua as the 3 countries who wont commit to the cause.

Trump’s reason for opting out;

  • The agreement “disadvantages” the US.
  • The deal left “American workers, who I love, and taxpayers to absorb the cost in terms of lost jobs, lower wages, shuttered factories and vastly diminished economic production.”

The CEOs and leaders of many big American companies have different views, committing to pursue the goals laid out in the Paris agreement, as well as their own initiatives.  Why? Because as global corporations,  they understand the influence they can have at a global scale. These leaders also see the opportunity to invent new technologies and advance the way the world does business in order to change the world extraordinary ways.

Facebook:

Screen Shot 2017-06-03 at 3.25.03 PM

 

Google:

General Electric:

Microsoft:

It also led to the CEO of Disney, along with Elon Musk to leave the president’s business council:

It wasn’t only business leaders,  the states and citizens Trump believes he made this decision for also rejected his reasoning.

“I was elected to represent the citizens of Pittsburgh, not Paris,” Trump told the world. Never mind that the good folks of Pittsburgh are citizens of the United States.  The response:

“So we’re getting out,” Trump explained in his announcement.  Thankfully this decisions doesn’t seem to matter to a number of the world most influence business leaders.

It could not be all over…….According to the experts it will take 4 years for the US to exit the agreement. That just so happens to be the day after Trumps last day in office (assuming he makes it to the end of his term and doesn’t get a second one!).

You might also be interested in Corporations not Government lead to a sustainable future.

Ever wondered how your investments perform when it comes to ethics and sustainability?

It’s sometimes argued that including environmental, social or governance (ESG) factors into your investment decisions isn’t an investment strategy in itself. That may be, but when you consider that sometimes as much as 50% of company’s value is made up of non financial data, if you’re not taking ESG into account, then you probably don’t have the complete picture of how the company you are backing is performing now, or in the future.

You can use this tool to check out how your investments on the ASX 300 fair.

According to RIAA, about 50% of institutional investors in Australia use ESG in their investment strategies. Some do it because its a better indicator of long term risk and return. ESG allows others to invest in their view of the future, think solar over for coal for example. Some use it to ensure that they are not investing in business practices that don’t align to their values. For whatever reason, there is plenty of research to indicate that more sustainable companies outperform their less sustainable peers over the long term. Which means having a more complete picture could result in higher returns.

What is ESG?

ESG (environmental, social and governance) is a generic term used in capital markets and by investors to evaluate corporate behaviour and to help determine the future financial performance of companies.

  • Environment assesses key business practices ranging from emissions and carbon intensity, waste management and recycling, to green energy production. By lowering expenses (e.g generating solar power rather than buying energy) and creating efficiencies (e.g lowering packaging cost through recycling), can all have a material impact on bottom line.
  • Social assesses key business practices focussing on workers and human rights. Topics such as diversity, (which at a board level has shown to reduce company risk and increase share price value), supply chain and supplier standards, human rights and justice, community development and even staff happiness (which research suggest has a material impact on productivity and therefore profit).
  • Governance relates to corporate structure, board independence and transparency and even covers a businesses stance on certain practices, such as animal testing. Some consider this a fundamental view of company and management ethics and ethos. Governance is generally considered by investors to be an integral part of assessing corporate risk through understanding how a business is conducting its affairs and can therefore be a lead indicator on assessing the potential risk of any investment decisions. For example some ESG assessors were able to flag transparency and governance issues at VW, which were the precursor to the recent emissions scandal which permeated through the entire business.

Benefits of ESG to risk and return

Capital loss: at its most basic level, using non financial indicators to identity risk helps to protect the capital you’ve invested and can go a long way to increasing long term returns. For example, if you have a $1 invetsment which loses 50% of its value, you have $0.5. To get back to a dollar you now need a 100% return, not a 50% return. Simple protection of invested capital to increase long term returns is often overlooked by investors and assessing ESG factors can help.

Returns: whether the link between outperformance and high ESG ratings are casual, or simply correlation, its hard to argue the benefits to a company’s bottom line and share price. One current trend for using ESG is to identify long term investment opportunities. If you are going to invest $1 today for 10 or 20 years, are you going to invest it in mining or solar technology? A growing portion of society and investors would back the long term opportunities in new clean technologies rather than any potential short term return uplifts in higher risk carbon intense assets or practices. A second key trend is investors looking to make money and do good at the same time. ESG help investors understand that these two things do not need to be mutually exclusive.

How can you use ESG to invest?

  • The positive screen: systematically select sectors, companies, and practices based on areas that align to your values. Commons positive categories include recycling and waste reduction, renewable energy and clean tech, protection of natural environment, human rights and employee conditions, community development, diversity and equality, corporate transparency, corporate sustainability policy.
  • The negative screen: systematically excludes industry sectors, companies, practices, or countries based on specific ESG or ethical criteria. This approach is also often referred to as values-based, or ethical screening. Common screens include gaming, alcohol, tobacco, weapons, pornography and animal testing but now expand to things like sugar or fast food.
  • Best of breed: investment in sectors, companies or projects selected for positive ESG or sustainability performance relative to industry peers. Suitable for those investors who want to maintain investments in industries that might otherwise be screened out, but select those that are performing the best from an environment, social and governance perspective.

You can use this tool to check out how your investments on the ASX 300 fair.

Author: Tom Culver is the CEO and co-founder of Goodments.

*The information in this post and the links provided are for general information only and should not be taken as constituting professional advice from the Author.

Image: Emily Morter

Six simple and realistic ways you can save the environment.

  1. Wash your dishes wisely. Dishwashers use less soap, water and energy than hand washing. Try to only ever run full loads and avoid pre-rinsing your dishes before you pack the washer.
  2. Have a meat free day. Raising livestock is not an environmentally neutral process. Chickens, sheep, cows and pigs — the animals we most commonly eat — drink a lot of water, take up considerable portions of land and emit a significant amount of greenhouse gases into the atmosphere. There’s also the energy required to transport meat and keep it refrigerated, and issues with deforestation, desertification, soil erosion, water pollution and overgrazing. Every meat free meal you consume has an impact. If vegetarianism and veganism aren’t for you, why not try a meat free day every week instead?
  3. Straw no more. Plastic is bad. We all know this. Single-use plastic, however, is especially bad. A straw will be used for a few minutes at most. Its purpose is to… drink? Something our mouths are very capable of doing on their own. Bottom line: straws suck. Don’t use them.
  4. Offset your air travel emissions. Travelling by plane is the least efficient mode of transport, emitting thousands of kilograms of greenhouse gases into the atmosphere every flight. Airlines and online booking agents often provide the option of paying a few extra dollars which are then invested into environmental projects. If you can splash thousands of dollars to travel this beautiful world of ours, you can surely spare some loose change to keep it that way.
  5. Reuse, recycle and repurpose fashion. Your fashion footprint is bigger than you’d expect. Nylon takes over 30 years to decompose, cotton is a chemically dependent thirsty crop and polyester is produced from petroleum. Looking trendy isn’t cheap on your pocket or the environment. Where possible, use the sacrosanct 3Rs — reuse, recycle and repurpose. Cut up an old tshirt and use it as a cleaning rag. Sell your much loved threads at a fashion market. Buy vintage clothing. Cut up a pair of jeans into trendy shorts. Iron on a patch to transform an old piece into something new. Get your clothes tailored if they no longer fit. Reinvent what you already own.
  6. Books be gone. Whether it be a university textbook, a magazine or a novel you want to dive in to, ebooks are often notably cheaper than physical copies and don’t require paper and ink. If however you enjoy the feel of book within your hands, you could always buy from a second hand bookstore or be ultra old school and head to your local library.

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