Written by Georgi Kantchev and Sarah Kent
Investing with climate change in mind is increasingly seen as a way to earn the highest returns and avoid risks
Abu Dhabi’s $800 billion sovereign-wealth fund recently added a new question to its investment process: How will the Earth’s changing climate affect a potential asset’s price?
This addition, without fanfare or press release, was driven, fund officials say, by a fiduciary duty to earn the highest returns and avoid risks. It wasn’t an attempt to brand the fund as more “green.”
From huge sovereign-wealth funds and hedge funds to startup private-equity groups to mutual funds and exchange-traded funds, asset managers and investors increasingly believe there are profits to be made and losses to be avoided by considering how climate change—and government efforts to combat it—might affect companies and industries over the long term.
Rather than a mere window-dressing exercise conducted for the benefit of conscientious investors, investing with the environment in mind is now seen as a way to gain an edge. Funds are pouring billions of dollars into technologies and industries they think will benefit from a transition to a clean-energy world and avoiding those that are likely to be hurt by it.
“Climate change is the growth story of our lifetime,” says Martina Turner, who four years ago launched the $36 million Accessible Clean Energy Fund, which invests in a basket of around 30 stocks focused on energy efficiency and storage, as well as wind, solar and geothermal energy. “We’re not ideologically driven, we’re not philanthropists. We want to make money,” says Ms. Turner, whose fund is up around 20% this year through April and has returned 22.5% since its inception.
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