Green
Visualized: The Power of a Sustainable Investment Dollar
Visualizing the Power of a Sustainable Investment Dollar
Sustainable investments are booming.
Between January and November 2020 alone, investments in sustainable ETF and mutual funds grew 96%. The UN Principles of Responsible Investment now has over 3,000 signatories representing over $100 trillion in assets. The U.S. Commodity Futures Trading Commission established a Climate Risk Unit to analyze climate risk across derivative markets, and as of March 2021, new sustainability disclosures have come into effect in Europe.
But how do we know if sustainable investments have made a difference?
To answer this question, the above infographic from MSCI examines the effect of a sustainable investment dollar by looking at real-world examples.
A Sustainable vs. Unsustainable Dollar
To start, investing legend Benjamin Graham has compared the stock market to a “voting machine.” Just as consumers vote with their purchasing decisions, investors vote with their investment dollars. Especially in the short term, as more dollars flow to sustainable companies, this builds their exposure and access to capital.
In the long term, meanwhile, the market can be compared to a weighing machine. The market recognizes companies with profitable business models that improve their intrinsic value over time. Ultimately, this allows sustainable companies to expand and continue operating.
Given the rising momentum in both green assets and climate targets, here is how investment dollars have influenced and driven change across three industries.
1. Clean Energy vs. Fossil Fuel
Over the last several years, the energy sector has been associated with many of the problems causing climate change. For this reason, many investors are seeking out greener energy alternatives. But how does moving investment dollars from an ESG laggard to an ESG leader support the environment and society?
First, here is a brief explainer of ESG laggards and leaders:
- ESG laggards: companies with the weakest environmental, social, and governance (ESG) performance in their sector.
- ESG leaders: companies with the strongest environmental, social, and governance (ESG) performance in their sector.
| Industry laggard: U.S. oil & gas company | Industry leader: U.S. utilities company |
|---|---|
| Scale of carbon-intensive business lines equal to 73% of its operation | 47% lower CO2 emissions than the industry average |
| This is the equivalent of adding 26 million cars on the road annually | This is the equivalent of removing 9.9 million cars off the road annually |
| 1 of 20 oil and gas companies are responsible for contributing to one third of GHG emissions since 1965 | Uses 3X as many renewable sources than industry average |
| 3X fewer jobs are created vs. energy efficient sector, resulting in lower productivity | This is roughly the same as saving over 9 million pounds of coal burned |
| MSCI ESG Rating: CCC | MSCI ESG Rating: AAA |
Source: MSCI ESG Research
Based on the above example, investors have the ability to finance powerful green initiatives that reduce emissions by almost half, relative to their peers.
2. Safe vs. Unsafe Working Conditions
Weak safety protocols are a key sustainability issue for the industrial sector. Here’s how two companies compare:
| Industry laggard: South African mining company | Industry leader: U.S. mining company |
|---|---|
| 11 fatalities in 2019 | Zero fatalities in 2019 |
| Faced lawsuits from miners surrounding lung diseases contracted from dust exposure in gold mines Settlement cost: $350 million | Board-level oversight monitors health and safety performance |
| Lags behind peers in high incident rates | Leads peers in low incident rates |
| Lags behind peers in setting incident reduction targets | Leads industry in lost time incident rate & total recordable injury rate |
| MSCI ESG Rating: CCC | MSCI ESG Rating: A |
Source: MSCI ESG Research
Despite the risks involved in the sector, investors can choose to support companies that take greater precautions to protect their workers.
3. Building Trust vs. Losing Trust
Over the last several years, the financial sector has faced increased scrutiny over fraudulent activities. Moving investment dollars from an ESG laggard to ESG leader may make a difference:
| Industry laggard: U.S. bank | Industry leader: Dutch bank |
|---|---|
| $3 billion settlement in creating fictitious accounts to meet aggressive sales targets | Sustainable finance portfolio valued at over $20 billion |
| Drop in top-tier bank ratings | 13% annual increase in climate finance |
| Board effectiveness questioned | Includes over 60 green loans, mobilizing environmentally friendly projects |
| Resignation of board members | Over 55% of board is female |
| MSCI ESG Rating: CCC | MSCI ESG Rating: A |
Source: MSCI ESG Research
From board diversity to green loans, a sustainable investment dollar supports companies that are actively advancing society and the environment.
Sustainable Investment: The Time to Act
Recently, investor dollars and shareholder activism have been closely linked.
Between 2018 and 2020, large institutional investors filed 217 shareholder proposals on climate change alone, putting increased pressure on companies. Meanwhile, 270 proposals were filed on corporate political activity and 228 on fair labor and equal employment opportunity over the same timeframe. Across all ESG proposals, $2 trillion in assets were pushing for more equitable corporate action.
Through the power of a dollar, investors can send a clear signal to companies: the time for sustainable investing is now.
Green
Mapped: The Global Reliance on Harmful Cooking Fuels
In this graphic, we map the number of people relying on harmful cooking fuels by region, using data from the World Health Organization.
Mapped: The Global Reliance on Harmful Cooking Fuels
While safe and clean cooking fuels are often readily available in the Western world, over 2 billion people globally lack access to these resources, instead depending on coal, kerosene, wood, and charcoal for their cooking needs.
These fuels, however, have deleterious impacts on human health, climate, and the environment, leading to millions of premature deaths each year and contributing significantly to global CO2 emissions and forest degradation.
To explore this topic in further detail, we partnered with Carbon Streaming Corporation to map the number of people without access to clean cooking alternatives, regionally, according to data from the World Health Organization (WHO).
The Two Billion People Without Access to Clean Cooking
Access to clean cooking fuels and technologies is unevenly distributed worldwide.
The majority of individuals (>95%) in North America, Europe, Australia, and New Zealand enjoy access to clean cooking fuels and technologies.
However, access is a lot lower in many parts of the world. Let’s now take a look at these regions.
| Region | Number of people without access to clean cooking, 2021 | Share of population without access to clean cooking, 2021 |
|---|---|---|
| Sub-Saharan Africa | 935 million | 82% |
| Central and Southern Asia | 723 million | 35% |
| Eastern and South-Eastern Asia | 433 million | 19% |
| Latin America and the Caribbean | 76 million | 12% |
| North America and Europe | 48 million | 4% |
| Western Asia and Northern Africa | 40 million | 7% |
| Oceania (excluding Aus. and NZ) | 11 million | 85% |
| GLOBAL | 2.27 billion | 29% |
With a staggering 935 million people, Sub-Saharan Africa has the highest number of people lacking access to clean cooking. This is more than 80% of the 2021 population.
On the other hand, 85% of the population of Oceania, excluding Australia and New Zealand, lacks access to clean cooking, but because of their smaller population this “only” adds up to 11 million people.
Closing the Gaps
With millions of annual deaths linked to cooking with harmful fuels, in addition to the millions of metric tons of CO2 emissions produced by their combustion, ensuring equitable access to cleaner and safer cooking options is important not just for the health of communities, but also for our planet.
Carbon Streaming’s Community Carbon project brings fuel-efficient solutions to millions of households in Sub-Saharan Africa by distributing cleaner cookstoves in Mozambique, Uganda, and Tanzania and water purification devices in Malawi, Mozambique, Uganda, and Zambia.
Contribute to safer cooking and water in Africa by purchasing carbon credits* from Carbon Streaming.
*Each metric ton purchased represents one carbon credit equivalent that will be retired to support the project. Purchased credits will be retired on the applicable registry by Carbon Streaming on behalf of the purchaser.
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