A company’s sustainability measure is becoming increasingly critical to its competitiveness and therefore to its share price performance, said an investment advisory firm CEO Wednesday.
Matthew Kiernan, CEO of Innovest Strategic Value Advisors, spoke about climate change at the Conference Board of Canada’s 2008 Corporate Governance Conference, in Toronto.
“It’s not some sort of peripheral, marginal phenomenon,” he said. “It’s a fundamental economic restructuring driver, in the same way that the railroads were.”
According to Kiernan, most of the investor focus in this realm is on the potential for carbon trading or investing in clean tech companies. He says this is far too narrow a view. “You’re catching about 5% of the opportunity bandwidth as an investor,” he says. “How companies do or don’t deal with these issues is very clearly correlated with their financial performance.”
He says opportunities, as well as risks, run across the sectors. “Those opportunities can be exploited through a portfolio of major global companies with superior ‘carbon risk’ management, as well as particularly strong exposure to the opportunities being created by climate change.”
Capitalizing on climate change took another step further into the mainstream last week, when Scotia Securities launched its climate change-focused fund. Its managers said the aim is to take advantage of companies who are ahead of the curve on the issue.
“Climate change presents the greatest risk we’ve seen in the history of the capital markets, but most importantly, an enormous opportunity,” said Bill Page, vice-president of State Street Global Advisors Ltd., and lead manager of the Scotia fund.
Kiernan agrees. “The impacts go well beyond the oil and gas and mining sectors— affecting the non-high-impact sectors like finance, insurance and banking.”
The financial community is starting to pay attention, said Valerie Chort, national leader of corporate responsibility and sustainability services, enterprise risk, at Deloitte & Touche. During a presentation at the conference, she noted the institutions that chose to be involved in the Carbon Disclosure Project, which collects carbon emissions data from the world’s top companies. Providing data to the project is entirely voluntary, but those that don’t disclose are also highlighted in the reports. Canadian signatories include Acuity Investment Management, Beutel Goodman & Co., Bank of Montreal, Scotiabank, Royal Bank of Canada, CIBC and Caisse de Depot.
Information on carbon risk is still hard to come by for investors, said Kiernan, but he added that those who seek it out will have a great advantage. “Climate risk exposure varies widely, between and even within industry sectors,” he said. “Yet those exposures are not fully priced into asset values.”
According to Kiernan, one of the great myths about climate change is that it is too remote and uncertain to warrant action from investors. “While companies worldwide have not achieved climate nirvana yet, they are light years ahead of the investors,” he said. “The investment community’s got a long way to catch up, particularly in Canada.”
“Investors can make money from climate change—and some are already doing so,” said Kiernan.
Climate change presents broad investment opportunities: Innovest
Conference Board governance conference looks at sustainability from an investor’s perspective
- By: Regan Ray
- February 13, 2008 February 13, 2008
- 18:09