How Can You Factor Sustainability into Investing? - Milken Institute Global Conference 2016

Joel Anderson  |

Sustainability has been a real buzz word of late, but it’s much more than just that. In terms of the investing community, there’s an increasing realization that it’s not just a fad or a warm and fuzzy idea. Rather, it’s a crucial new risk element that necessitates the focus of asset managers who intend to truly prepare their funds for the future. It was a subject that was brought into particular focus late last year, when BlackRock, the world’s largest asset manager, published a report called The Price of Climate Change , which insisted that the advancing issue of global warming had rendered trillions of dollars in high-cost oil reserves “stranded assets” in the form of unburnable carbon-heavy fuels. The report argued that it was necessary to include this consideration in the valuation of companies claiming those assets on their balance sheet.

The issue of how sustainability concerns should factor into investing was at the center of the panel Investing in Sustainable Development at the Milken Institute 2016 Global Conference. Panelists talked at length about how things like placing a clear price on carbon and avoiding an unpredictable mish-mash of regulations across national borders were important for truly building a stable investment future.

“I thought it was great,” said moderator John McArthur of the Brookings Institute when reached for comment after the panel ended. “This is a huge issue. I think what you hear is that there’s a real movement afoot to think through investments differently, and you have [here] the people who are leading that movement of investing differently. But I think the central point is that markets are missing a lot of the core opportunity. So whether that’s Wall Street missing it, whether it’s the regulatory challenge of not enough people understanding what the long term horizon really looks like. But there’s also a policy bit to this too, which is that people want a stable, long-term environment. So I thought the core messages were pretty clear.”

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