Fighting fires with finance: how investment professionals can help tackle the climate emergency

29.08.2023 - 06:35 / theguardian.com / Can Help

Record temperatures. Fires in Canada that covered New York in a dystopian haze. Floods that left one-third of Pakistan underwater. Sea ice levels at an all-time low. You don’t have to look far to find evidence that the climate emergency is getting rapidly worse.

As the reality of the climate crisis has become increasingly impossible to ignore, the world of finance has woken up to the huge financial risks it poses. These include the devastating effects of a warming planet, the regulatory and political impact of the global transition to a low-carbon economy, and the reputational risk of being a laggard in the eyes of eco-conscious consumers.

Another key driver is the growing pressure from businesses on their suppliers in an effort to reduce the greenhouse gas emissions along their entire supply chain. Likewise there is pressure from investors and lenders: companies and organisations that are more heedful and proactive on climate issues are often viewed as more futureproof and lower risk when it comes to insurance and the ability to attract capital – and also better placed for any future regulations and legislation.

As well as trying to mitigate these myriad climate risks, investors have also become more attuned to the positive role the financial sector can play in supporting the net zero transition and funding the global shift to cleaner energy. After all, fighting rising global temperatures is in some respects a global effort to reallocate financial resources. The financial industry, therefore, sits at the heart of a complex web of powerful push and pull factors for taking climate action. Which means a career in finance can be an impactful option for those seeking to devote their working lives to tackling the climate crisis.

“We’ve got a younger generation that is more purpose driven and they’re the ones coming into finance,” says Chris Fidler, head of industry codes and standards at CFA Institute, which provides the CFA Program, the industry qualification regarded as its gold standard. “They want to make a difference and, every year, there are more people in the industry that are cognisant of these ethical- or values-based decisions.”

A case in point is Justin Kew, who completed the CFA Program and now works as an ESG analyst at an asset management firm in London. ESG refers to investment strategies that explicitly take environmental, social and governance factors into account, as well as more narrow financial measures, such as profits and revenues.

“You start to discover there are market inefficiencies that people have overlooked, and that really got me interested,” says Kew, who began specialising in ESG about 10 years ago. “There is real world change you can help to put in place, and you start to