Is it possible to make greenwashing checks? How can you ensure that your green investments are really green? Bryan Ferrari says that it’s important to find investments “suitable for one’s perceptions and convictions.”
While more savvy investors may want to dig deeper into reports, other clients simply don’t have the time, knowledge or interest. Ferrari adds that there are some who have a more purist approach, those trying to be as sustainable as possible in their daily lives, including their investments, while others are more “mainstream--say, they have grandchildren and they need to make the world better without making sacrifices with their SUVs, for example.”
When making a decision on what to invest in, “it should be something that’s bottom-up,” Ferrari adds. “It’s impossible for a bank, or a big asset manager, to decide for all its clients.”
He provides the example of investing in nuclear which, despite large volumes of waste, is itself considered a “clean” energy. While some clients would say nuclear is sustainable, others would never invest in it because of their political ideologies.
A similar example Ferrari provides is that some accept investing in a large company which uses vast amounts of palm oil--the production of which is low cost but comes at the expense of tropical forests and their biodiversity—because the company is providing a large number of jobs or is able to do other sustainable activities elsewhere.
“The biggest impact for the moment is done on the private equity side because there you take over a company and have the management board and take the reins,” Ferrari explains. With publicly listed funds, there are impact funds which “generate impact but give less important space to financial returns [without] neglecting those.”
The philosophy of an investor is indeed key. Ferrari adds, “While in traditional finance, you were looking for shareholder value, now with sustainable funds it’s stakeholder value: the investors, the owners, the employees, the communities around the companies--that’s something you can achieve with impact funds.”