Business in a Time of Climate Crisis
Investments – Green Investing and Energy Transition
Anisha Gamnani (0738662)
Trent University
Business in a Time of Climate Crisis (ADMN 1000H)
Submission Date: November 28, 2021
Due Date: November 28, 2021
Course Instructor: Ray Dart
Course Professors: Ray Dart, Ken Chen, Amina Malik, Yi Liu, Jamie Morales, Ji Zhang
Group’s Teaching Assistants/Seminar Leaders: Alushe Staffa Other Teaching Assistants:
Beth Needham, Brad Keizerwaard
Introduction
The COP26 conference recently took place and even though the world is still recovering from
the Covid-19 Pandemic yet, somehow climate change is the biggest crisis we are facing.
Businesses usually find growth by following trends but sadly being sustainable is not simply
about what is trending but more about how we work on being resourceful and eco-friendly. It
is not just about growth but a requirement for all businesses to transform into sustainable
organizations.
“Corporate strategic plans must move from environmental sustainability to one of overall
viability.” (Laura Zizzo,2021)
This paper will discuss two main topics: Green Investing and Energy Transition.
GREEN INVESTING
What does green investing refer to? In simple words, green investing means investing in
financial products that use clean forms of energy such as hydroelectricity or solar energy.
Green investing entirely in itself is not a new concept, Socially Responsible Investing (SRI)
and Ethical Investing (investing in companies that avoided misusing natural resources) were
practices followed by many back since the 1990’s, it can be practised simply by not investing
in companies that produce/manufacture liquor, tobacco, or firearms.
Climate change being one of the biggest issues in current age, green investing is often
associated with investing in financial products of companies that have a strong
Environmental, Social and Governance framework, better known as ESG. Although there is
no formal organization or body that exists to invigilate this, nor is there a universal standard
to be followed.
Investing in general is a delicate practice and mixing it with political correctness can cause
more complications, but I believe that those complications are necessary.
Anyone with basic knowledge or minimal experience with investing or risk management
knows that diversification of investments is the most important step to take while building
your investment portfolio. Which is why it might seem like a difficult or stupid decision to
only invest in such companies but there is truly not a lot to worry about, according to a Globe
and Mail article one can practice green investing by focusing on their goal of sustainability
while diversifying their investments
“Indexes that track companies that score relatively well on ESG are sprouting up with a
wide variety of stocks in them – giving investors plenty of choice as funds track these
indexes.”
(DAVID BERMAN, 2021)
But the issue is that a good ESG score can be achieved through labour practices and
diversity.
So, the question we come down to is: What can be done to ensure that you invest in
companies that have a good ESG score for their environmental policies?
There are three options:
1) Hire a professional to select stocks for you and help you invest your mone y in the
right place where it can be used in the greenest way possible.
2) Invest in EFTs also known as Exchange Fund Trades that are baskets or stocks that
will help you diversify your investments
3) Buy individual stocks of companies.
Each of these options come with their own risks and rewards, but that is the very core of
investing.
As a beginner, “ETFs that track ESG-related stock indexes are a solid starting point, says
Amber Brown.” (Jeffry Jones, 2021)
In theory, green investing seems like the best opportunity to help save the world as you
benefit from it financially, but the fact is that there is no governing body to help regulate
these reports. Sure, you can outsource a firm to internally investigate your ESG score but
there are no specific rules (as of yet) and because of that it is easy to misuse this so-called
trend of green investing to encourage investors to financing your organization.
So, as an investor, what can you do to ensure your money is being invested in a company
that is truly trying to save or help the environment? Lisa Meger says
“In Canada, there are no regulations currently that govern the marketing of ESG funds
(although that is likely coming). In the meantime, understanding exactly what you are getting
means doing your homework and digging under the surface. For example, for DIYers looking
at ETFs, you should find out what ESG index it’s replicating, then look at how that index is
constructed. Read the fine print. You might be surprised at what companies are included or
excluded based on the index’s ESG criteria.” (Jeffry Jones, 2021)
Those investing in mutual funds should do their research and examine the companies
before investing.
ESG is a growing ethical practice by business, a part or even format of this growth is
called Energy Transition. The word energy here is more of an umbrella term, under which
all form of energy is included for example gasoline, electricity etc.
“Despite the pandemic, additions of solar and wind power to electricity grids increased at
their fastest rate in 20 years in 2020, according to the International Energy Agency.
Solar energy costs have dropped more than 80 per cent over the past decade.” (Emma
Graney, 2021)
It is truly difficult to change something at a large scale but the drop in cost of clean energy is
a great step. It pushes the idea of sustainability not just at a personal level but at a big scale.
Not only this, but clean energy is a growing market, Canada is the 4th largest producer of oil
in the world, “97 per cent of our reserves are in Alberta’s oil sands, which have a higher
environmental footprint than conventional crude, because extracting bitumen and other
heavy crude oil requires more energy than going after lighter, more accessible forms of
oil.” (Emma Graney, 2021)
Due to this, the oil produced is “emissions intensive” and the ESG score is low, but that is
not the worst scene as this situation is encouraging major transportation and oil companies
to focus on eco-friendly fuels instead.
Some of the biggest corporations that exist aim to cut down their emissions to 0 by 2050,
and this goal may seem unachievable or unrealistic, but the truth is that there is no other
option. Though it is not a legal requirement by any government, the trend of green
investing and the fact that if we keep misusing our natural resources there may not be a
world or population left to profit off is good enough of a reason for this transition into a
cleaner, better sources and/or production of energy.
CONCLUSION
So now that we know about green investing and energy transformation, we must ask
ourselves, are ESG scores legitimate? Well, just like any other aspect of business, there are
pros and cons- for example, on one hand, we have Tesla, a company producing electric
vehicles with amazing features but at the same time those vehicles are such cheap make and
so expensive to buy or even maintain that most people prefer to not purchase them.
Similarly, it is without a doubt that all businesses should practice not only ethicality but also
strive to be as sustainable as possible but those who do run these corporations are often
focused on financial gain and may misuse the curtain of ESGs for their gain, to greenwash
their products/services and take advantage of consumers. This is where we must be careful
and use as many resources as we can to identify what businesses truly care about our planet
and what steps they are taking to achieve sustainability.
References
Bein, S. (2020, August 31). Globe Climate: Finance and investing can’t self-isolate from
climate change. The Globe and Mail.
https://www.theglobeandmail.com/canada/article-globe-climate-finance-andinvesting-cant-self-isolate-from-climate/
Bein, S. (2021, February 1). Globe Climate: Investing in the future never looked so green.
The Globe and Mail. https://www.theglobeandmail.com/canada/article-globe-climateinvesting-in-the-future-never-looked-so-green/
Bein, S. (2021, November 8). Globe Climate: Five things to take away from the first week of
COP26. The Globe and Mail. https://www.theglobeandmail.com/canada/articleglobe-climate-5-things-to-take-away-from-the-first-week-of-cop26/
Berman, D. (2021b, November 12). Green Investing 101: What is green investing? The
Globe and Mail. https://www.theglobeandmail.com/investing/article-green-investing101-what-is-green-investing/#comments
Berman, D. (2021a, November 10). Green investing 101: A getting started guide. The Globe
and Mail. https://www.theglobeandmail.com/investing/article-green-investing-101-agetting-started-guide/
Graney, E. (2021, November 10). Green Investing 101: What is the energy transition? The
Globe and Mail. https://www.theglobeandmail.com/investing/article-green-investing101-what-is-the-energy-transition/
Jones, J. (2021, November 10). Green Investing 101: Expert advice for what to do next. The
Globe and Mail. https://www.theglobeandmail.com/investing/article-green-investing-101expert-advice-for-what-to-do-next/
Jones, J. (2021, November 10). Green Investing 101: Can green investing save the planet?
The Globe and Mail. https://www.theglobeandmail.com/investing/article-greeninvesting-101-can-green-investing-save-the-planet/
U. (2021, November 16). Green investing 101: Glossary of key climate and investing terms.
The Globe and Mail. https://www.theglobeandmail.com/investing/article-greeninvesting-101-glossary-of-key-climate-and-investing-terms/
U. (2021, August 24). Why sustainable investing should be part of your investment portfolio.
The Globe and Mail. https://www.theglobeandmail.com/business/adv/article-whysustainable-investing-should-be-part-of-your-investment-portfolio/
Zizzo, L. (2021, November 18). It’s time for businesses to start planning for the climate
transformation, but where to begin? The Globe and Mail.
https://www.theglobeandmail.com/business/commentary/article-its-time-forbusinesses-to-start-planning-for-the-climate/