by Tom Harris, America Outloud:
How would you react if you discovered that your bank manager knowingly accepted lower returns in your investment portfolio in order to bolster political causes his financial institution supported? In other words, he/she was using your money to back causes the bank supported, and you perhaps did not?
Well, you would fire him on the spot, of course, and seek out an investment manager who puts maximizing your portfolio’s returns above all else. If that means investing in fossil fuel development, then so be it. Your financial gain should be your bank or pension fund’s first and only concern.
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So, it is important that investors discover how much of a role, if any, the ESG (Environment, Social, and Governance) movement is playing in their pension funds and other investments.
You see, many banks and other investment companies are at the forefront of incorporating climate change into their decision-making processes. They say that they think physical and transitional climate risks can significantly impact their portfolios’ value. This is not the case, of course, but virtue-signaling to woke investors, regulatory agencies, government, and climate activist shareholders often takes a higher priority than maximizing your returns. This includes preferentially investing in renewable energy, sustainable agriculture, and so-called green technologies. To align with global decarbonization goals, some firms have even divested from fossil fuel companies in the belief that this strategy reduces exposure to stranded assets and aligns portfolios with a low-carbon future.
We are told that some investment companies conduct rigorous climate risk assessments to evaluate the potential impact of climate change on their, and so your, assets. The problem is that they are undoubtedly accepting as gospel the UN IPCC creed that our “carbon emissions” are causing more extreme weather events and other problems, and so they see a significant regulatory risk associated with carbon-intensive industries like coal, oil, and natural gas.
We have also seen the rise of climate-themed mutual funds that supposedly reflect growing investor demand for “sustainable” options. Indeed, some managers are increasingly aligning their portfolios with the UN’s Paris Agreement goals, working to reduce the carbon intensity of their holdings and investing in companies committed to achieving net-zero emissions. Some central banks and regulators are also pushing financial institutions to integrate climate considerations into their operations. This includes conducting climate stress tests and adhering to disclosure requirements. As a result of all this, the latest International Energy Agency Net Zero Roadmap says that “clean” energy transition-related investment is expected to accelerate from $1.8 trillion in 2023 to around $4.5 trillion annually by 2030.
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