Globally, family offices and high net worth individuals have over $50 trillion in assets to deploy. By 2025, this asset volume is expected to surpass US$100 trillion. These groups represent a powerful force for good. The Global Impact Investment (GIIN) Forum held last month Amsterdam showed how "impact investing," once a niche investment activity is rapidly growing. BlackRock, the world’s biggest asset manager, recently launched a new “impact” division, while Goldman Sachs acquired impact-investment firm, Imprint Capital back in 2015. American private-equity firms, Bain Capital and TPG, have also launched impact funds.
Despite this flurry of activity, investors still need better climate change impact opportunities. With this in mind, ET Index Research hosted a webinar for family offices and high net worth individuals looking to allocate a percentage of their capital to climate solutions. All speakers stressed that the opportunity for investors to support the low carbon transition across asset classes was growing. For family offices and other impact investors, the clean energy transition creates new opportunities to support a climate-secure future while making strong returns.
A new risk and reward matrix for investors after Marrakech
James Cameron, Co-Chair of ET Index Research and Principal at SystemiQ identified “a new risk and reward matrix once [investors] fully understand the post-Marrakech policy context”. The global agreement to decarbonise all sectors of the economy by the mid-century means that investors must now respond to the reality of changing markets and policy action at all levels of government. Municipalities, states, and nations are shifting industrial policy and finance in line with these goals. Action on climate targets “will inevitably reshape capital markets” as they are implemented by global governments at all levels.
Energy and infrastructure - climate smart investments
Whether or not the United States continues to show climate leadership on the global stage, speakers Sir Ed Davey and Carl Tishler agreed that India and China are both rising to the challenge and enormous economic opportunity represented by the shift to clean energy systems.
Sir Ed Davey, Chair of Mongoose Energy, focused on investment opportunities in clean energy in the UK and India. In the UK, Mongoose Energy uses innovative investment vehicles to support community-owned clean power generation. For inspiration, Mongoose Energy has looked to lessons learned in the financing and development of community-owned power sectors in Germany and Denmark, then adapts these strategies for the UK market.
Davey stressed that climate-smart private investors should consider renewable energy finance as a major win-win; providing both an increasingly strong investment case across jurisdictions, and addressing the need for more clean electricity for a growing global population. An estimated 1.2 billion people – 16% of the global population – lacks access to electricity. Davey’s international work focuses on scaling up solar power electrification for 300 million Indians. With detailed knowledge of the industry and an expert group of engineers formerly of Sun Edison India, Davey is working with family office syndicates to scale-up impact and investment returns in India’s booming clean power sector.
For Carl Tishler, an independent investor and founding CIO at Infraventus Group, a focus on infrastructure assets and the companies that will service the clean energy transition is key. Tishler targets private companies with well-developed management teams who are providing key goods and services to the clean energy sector.
Systematic climate impact through public equity allocations
Sam Gill, ET Index Research CEO, highlighted how family offices can have systematic impact in their public equity allocations with ET Low Carbon Indexes. The ET Low Carbon Index Series is underpinned by the ET Carbon Rankings, which score the world’s largest listed companies according to their carbon emissions intensity.
By linking an investable index to a public ranking of companies, Engaged Tracking offers investors a mechanism with which to incentivise listed companies to reduce their emissions. According to Gill, “public markets are where global capital comes together and it is essential that low-carbon index strategies be designed to drive change across the listed universe.”