In the eve of September 1, 2021, the remnants of hurricane Ida caused torrential rainfall in New Jersey.
In short of three hours, I watched flash flood turned our home in a farm outside of Princeton into a “lake house” – everything on the first floor was floating including refrigerator and three cars parked outside were submerged. Living in the inland and plain field of New Jersey, my family was just one of the million families that have been affected by the flood due to extreme weather conditions.
Such unpredicted extreme events are increasing each year and bring human suffering and financial losses. Hurricane Ida cost $75 billion losses and Pakistan floor in 2022 left 2.1 million people homeless and agriculture fields were devastated by flooding. According to World Meteorological Organization, eight climate change records the world broke in 2021.
The planet we live on is under stress and screaming. We simply don’t have planet B.
As an investment professional, my investment thought processes have been challenged by the implications of climate change. According to major world research organizations including McKinsey, the world needs annual 6% global GDP invested in clean energy solutions in the next 30 years to achieve carbon neutral in 2050. The math indicates that the earlier the transition is taken place the less future costs of remediating the crisis.
In the past year and a half, my investment research has been focusing on energy transition, digital transformation and circular economy, while integrating investment themes into existing portfolio framework and new investments into clients’ portfolios. The results are encouraging as an increasing number of publicly traded companies are taking proactive actions to provide energy transition solutions and rewarded financially.
Green wash debate has brought negative connotation to EGS related investments recently, where public institutions are shunning away to avoid headline risk. My take ESG is an evolving policy framework, it is not an investment strategy on its own although the policies do have impact on the overall size of the green economy in the long run and could provide short-term intensives to jump start new industries and change consumer behavior. However, like any other business, the long-term success depends on the market needs and the profitability as well as competing competitive force that will make winners and losers in the process.
As an optimist, I take each challenge as opportunity. We need more optimists – investors and consumers to join the force to create a sustainable future.
