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Sustainable business.
Sustainable investing.

Does the US Election change the market for Responsible Investing or has the train already left the station?

November 18, 2016

 

Since the election of President-Elect Donald Trump, I've been listening, observing, thinking and, am being asked countless times ... "What does this election mean for sustainability and responsible investing?".  

 

The obvious answer is that it's not clear.  But, my gut reaction is that the "train has already left the station" on so many of the issues that are intersected with responsible investing.  

 

When we describe responsible investing as the integration of environmental, social and governance (ESG) factors into the fundamental financial and risk analysis of our investments, have things really changed that much?

 

What we know is that women, yes those same women who were the talk of the locker room, will control 65% of the wealth in the USA the in the next 10 years (according to Morgan Stanley).  

 

We also know that $30 Trillion will transfer from baby boomers to 90 million Millenials over the next few decades.  And, that 67% of those Millenials believe that investments are a way to their express their social, political and environmental values, vs 35% of Baby Boomers.  

 

This week, the the US Social Investment Forum highlighed that sustainable, responsible and impact (SRI) investing assets in the USA have expanded to $8.72 trillion at the beginning of 2016, up 33% from $6.57 trillion in 2014.  That's almost $1 of every $5 invested in the USA.  Much of this growth is driven by asset managers, who now consider environmental, social or corporate governance (ESG) criteria across $8.10 trillion in assets, up 69% from $4.8 trillion in 2014.

 

And then there are the claims of president-elect Trump wanting to roll-back environmental regulations and withdraw from COP 21.  What I learned this week is that, this process would take 4 years to do so.  To quote the great Canadian singer Alanis Morissette "ironic don't you think".

 

And then there's the private sector in the USA, they have a very loud voice that I think any President would be open to listening to.  Well, we've learned that 365 US companies, including Nike, Starbucks and Levi Strausse - have signed a letter urging the Trump administration to remain committed to the Paris climate agreement. 

 

In addition, dozens of Fortune 500 businesses, including Walmart, Microsoft, Mars, Berkshire Hathaway and Goldman Sachs have said they will continue to work to source 100 percent of their electricity though the RE100 partnership.  

 

Some of the best opportunities in the USA right now are in clean tech.  The speed and scale of solar and wind is threatening to make coal history even without climate concerns.  Solar employees more than 4 times as many Americans as coal, and it's growing fast.  Some of the USA's biggest and boldest companies, including Tesla and Google, are betting big on renewables.  

The sustainability and responsible investment movement has developed to being more than "just" about the environment.  It's now also about business and business competitiveness.  

 

Now although I don't know much about Donald Trump, my sense is that if there's money to be made and jobs to be saved ... he's probably the one guy that might be open to changing his mind.  In fact, he may have the support of his military given that the Pentagon has defined climate change as an existential threat to the USA.  Ok, perhaps I'm being a bit too optimistic here.

 

What I know is, businesses that have already begun to move towards sustainability, understand it's value.   Investors who are already integrating  ESG factors, also see it's value - both in how it can help them create new products and services, but also for managing risks.

 

Fact is, folks - money talks. When I look at all of these indicators, I realize that uncertainly will remain in this market, but I am not convinced that we'll see a significant shift away from corporate sustainability or from responsible investing.  

 

There's too much money to be saved. Too much money to be lost. Too much money to be made, by significantly shifting directions.  There is one thing I am confident about.  President-Elect Trump understands money!

 

 

 

 

 

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