Saturday, June 21, 2025
  • Login
Euro Times
No Result
View All Result
  • Home
  • Finance
  • Business
  • World
  • Politics
  • Markets
  • Stock Market
  • Cryptocurrency
  • Investing
  • Health
  • Technology
  • Home
  • Finance
  • Business
  • World
  • Politics
  • Markets
  • Stock Market
  • Cryptocurrency
  • Investing
  • Health
  • Technology
Euro Times
No Result
View All Result

Book Review: Investing in the Era of Climate Change

by Matt Lyons, CFA
October 2, 2022
in Investing
Reading Time: 6 mins read
A A
0
Home Investing
Share on FacebookShare on Twitter


Investing in the Era of Climate Change. 2022. Bruce Usher. Columbia University Press.


The scientific consensus is that climate change is real, occurring now, and potentially catastrophic. As a result, most countries have committed to reductions in greenhouse gas emissions with the aim of “net zero” emissions by the middle of the 21st century. To achieve the reductions, innovation and investment are needed on a large scale.

Bruce Usher of Columbia Business School approaches the issue from the perspective of the investor, and in Investing in the Era of Climate Change, he identifies both what the implications of climate change are for the investment community and how investment capital allows us “to save us from ourselves.” The role of investors, he says, is no less than “financing the world’s future.”

Early in the book, Usher gives an account of technological developments that can mitigate the effects of climate change — renewable power, electric vehicles, battery storage, green hydrogen, and carbon removal. This discussion serves as a valuable introduction to later sections that deal with the implications of such climate solutions for the investment community.

One section identifies the alternative strategies that the investor can use:

  • Risk Mitigation
  • Divestment
  • Environmental, Social, and Governance (ESG) Investing
  • Thematic Impact Investing (to finance businesses that address a specific environmental or social challenge, such as climate change)
  • Impact First Investing (in which investors focus on solving social and environmental problems and are willing to accept a below-market financial return in exchange for greater impact)

Each of these strategies is suitable for a particular kind of investor. University endowments may opt for Divestment, large fund managers for ESG, specialist fund managers for Thematic Impact Investing, and philanthropists for Impact First Investing. Some approaches help to control risks; others (according to Usher) can improve returns.

Ad tile for ESG and Responsible Institutional Investing Around the World: A Critical Review

Asserting that “all investors should understand the opportunities and risks of investing in real assets that offer climate solutions,” the author then looks at both financial and real assets. Real assets include renewable energy projects, real estate, and forestry and agriculture. His analysis examines the valuation issues relevant to large-scale renewables projects, along with insights into government incentives and prospective returns (internal rates of return of 6%–8% for solar and wind projects and potentially more return for higher risk investments in battery energy storage systems). The discussion of real estate is brief but includes such considerations as the risks from flooding and wildfires as well as the benefits of energy upgrades — the Empire State Building is an interesting example. The importance of carbon markets is illustrated by the chapter on forestry and agriculture.

The author’s analysis of financial assets includes chapters on venture capital, private equity, public equity, equity funds, and fixed income. We are given interesting examples of successful and unsuccessful investments, along with the following approaches to assessing investments in the era of climate change:

  • Is a company minimizing risk by reducing its emissions, both direct and indirect?
  • What would be the impact of a price on carbon?
  • Is the company an incumbent in an industry or a disruptor? If a disruptor, how likely is it to succeed?

The chapter on equity funds identifies many types of currently available climate-focused funds and exchange-traded funds (ETFs). The analysis covers the differences among low-carbon funds, fossil-fuel-free funds, and climate transition funds. The author notes that some of these funds are particularly large and successful: “BlackRock’s Carbon Transition Readiness ETF pulled in $1.3 billion on its first day of trading, making it the biggest launch in the ETF industry’s three-decade history.”

Tile for The Future of Sustainability in Investment Management

A successful fund launch is one example of how investing in climate solutions has become mainstream. So too is the establishment of such bodies as the Glasgow Financial Alliance for Net Zero — “a global coalition of 450 financial firms managing assets of more than $130 trillion that are committed to reducing greenhouse gas emissions to zero.”

The author believes that the fixed-income markets will be the most important for the funding of climate solutions. Part of the reason is their scale, and part is because many projects, with steady cash flows over long periods of time, lend themselves to debt financing. An important area is that of “green bonds,” the market for which is described as “red hot.” In 2021, $500 billion of green bonds were issued. Other innovations in fixed-income investing include the securitization of solar leases and loans.

Several times throughout this book, we read estimates of the costs of necessary climate solutions. The various numbers can be confusing, but all are broadly consistent with a Boston Consulting Group estimate of what is required: $3 trillion to $5 trillion per year. This enormous level of investment is a huge step up from where we are today (spending of circa $600 billion a year, according to Usher). The investment is necessary, however, especially because other possible responses to climate change can be convincingly rejected. (These alternatives include adaptation and the control of population growth.)

A welcome aspect is that the general tone of the book is upbeat, with a focus on solutions rather than resorting to despair. At times, however, this approach means glossing over certain risks to climate targets. For example, livestock make a material contribution to greenhouse gases (in the form of methane), but apart from references to the success of Beyond Meat, the author offers us few solutions to the issue of livestock. Similarly, he says little about how to mitigate emissions caused by the production of cement. Furthermore, although he does write that “perhaps the greatest challenge to reaching net zero is the inability by countries to cooperate,” he says little about how dependent we are on fragile global supply chains for solutions, such as battery storage systems. The author makes clear, however, that his goal is not to describe every possible solution to the climate crisis but to focus on the implications of climate change for investors.

Investing in the Era of Climate Change draws from a wide variety of sources and is both well researched and highly readable. Some readers may be familiar with much of the material, but for others it may prove an inspiration to invest in the mitigation of climate change — in the pursuit of both investment opportunities and our collective future.

If you liked this post, don’t forget to subscribe to the Enterprising Investor.


All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.


Professional Learning for CFA Institute Members

CFA Institute members are empowered to self-determine and self-report professional learning (PL) credits earned, including content on Enterprising Investor. Members can record credits easily using their online PL tracker.

Matt Lyons, CFA

Matt Lyons, CFA, has worked in the finance industry for more than 20 years. He currently works at Bank of Ireland in Dublin, where his role includes investment appraisal and performance measurement. He began his career with Thomson (now Refinitiv), where he was head of operations for the Irish business, specializing in securities pricing, fundamental analysis, and earnings forecasts. Lyons has degrees from Trinity College Dublin and the University of Ulster, and he is a CFA charterholder.



Source link

Tags: BookChangeclimateEraInvestingReview
Previous Post

Latest Updates on Presto Stock

Next Post

The Next Dogecoin Is Here and It Has the Utility to Pump and Pump

Related Posts

From Ivory Tower to Investment Toolbox: Why Research Matters

From Ivory Tower to Investment Toolbox: Why Research Matters

by Fred Pinto, CFA, ICD.D
June 20, 2025
0

A few of the strongest instruments in immediately’s funding playbook began as educational arguments. However they didn’t reshape apply till...

10 High Dividend Stocks To Sell Now

10 High Dividend Stocks To Sell Now

by Robert Ciura
June 18, 2025
0

Printed on June 18th, 2025 by Bob Ciura The purpose of rational traders is to maximize whole return. Whole return...

From Theory to Trillions: David Booth | Financial Thought Exchange

From Theory to Trillions: David Booth | Financial Thought Exchange

by Cathy Scott
June 18, 2025
0

It’s simple to neglect that the thought of investing in the whole market — passively and scientifically — was as...

Quantum Computing Penny Stocks

Quantum Computing Penny Stocks

by Russ Amy
June 19, 2025
0

Inventory Ticker YTD Efficiency D-Wave Quantum QBTS +101.6% Rigetti Computing RGTI −26.3% Arqit Quantum ARQQ −34.2% Russell 2000 Index –...

The 10 Highest Yielding Dividend Champions | Yields Up To 7.2%

The 10 Highest Yielding Dividend Champions | Yields Up To 7.2%

by Robert Ciura
June 17, 2025
0

Revealed on June seventeenth, 2025 by Bob Ciura Dividends are a welcome signal for dividend traders. And dividend development is...

Singapore Floats Retail Access to Private Markets: Next Frontier for Asset Managers?

Singapore Floats Retail Access to Private Markets: Next Frontier for Asset Managers?

by Alfonso Ricciardelli, CFA, CAIA
June 17, 2025
0

Retail buyers in Singapore could quickly achieve entry to personal market investments as soon as reserved for establishments and the...

Next Post
The Next Dogecoin Is Here and It Has the Utility to Pump and Pump

The Next Dogecoin Is Here and It Has the Utility to Pump and Pump

How Natural Disasters Can Change A Politician

How Natural Disasters Can Change A Politician

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Huawei unveils a beta version of HarmonyOS 6, making it available to developers, and announces the HarmonyOS Agent Framework to help developers create AI agents (Coco Feng/South China Morning Post)

Huawei unveils a beta version of HarmonyOS 6, making it available to developers, and announces the HarmonyOS Agent Framework to help developers create AI agents (Coco Feng/South China Morning Post)

June 21, 2025
CoinMarketCap’s front-end compromised, investigation underway

CoinMarketCap’s front-end compromised, investigation underway

June 21, 2025
Real Vision Predicts Bitcoin Blastoff, Altcoins To Erupt Shortly

Real Vision Predicts Bitcoin Blastoff, Altcoins To Erupt Shortly

June 21, 2025
Billions of login credentials may have leaked. Here’s how you can protect your accounts

Billions of login credentials may have leaked. Here’s how you can protect your accounts

June 21, 2025
This  USB-C accessory is one of the best investments I’ve made for my electronics

This $12 USB-C accessory is one of the best investments I’ve made for my electronics

June 20, 2025
Pumpfun reportedly delays token auction to July amid legal troubles

Pumpfun reportedly delays token auction to July amid legal troubles

June 21, 2025
Euro Times

Get the latest news and follow the coverage of Business & Financial News, Stock Market Updates, Analysis, and more from the trusted sources.

CATEGORIES

  • Business
  • Cryptocurrency
  • Finance
  • Health
  • Investing
  • Markets
  • Politics
  • Stock Market
  • Technology
  • Uncategorized
  • World

LATEST UPDATES

Huawei unveils a beta version of HarmonyOS 6, making it available to developers, and announces the HarmonyOS Agent Framework to help developers create AI agents (Coco Feng/South China Morning Post)

CoinMarketCap’s front-end compromised, investigation underway

  • Disclaimer
  • Privacy Policy
  • DMCA
  • Cookie Privacy Policy
  • Terms and Conditions
  • Contact us

Copyright © 2022 - Euro Times.
Euro Times is not responsible for the content of external sites.

No Result
View All Result
  • Home
  • Finance
  • Business
  • World
  • Politics
  • Markets
  • Stock Market
  • Cryptocurrency
  • Investing
  • Health
  • Technology

Copyright © 2022 - Euro Times.
Euro Times is not responsible for the content of external sites.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In