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The surprising poster child for ESG investing

  • July 22 2021
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The surprising poster child for ESG investing

By Cameron Micallef
July 22 2021

Investors looking to have the most impact on the world should not simply follow ESG values, but instead focus on companies that will be needed in a “post-carbon world”.

The surprising poster child for ESG investing

The surprising poster child for ESG investing

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  • July 22 2021
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Investors looking to have the most impact on the world should not simply follow ESG values, but instead focus on companies that will be needed in a “post-carbon world”.

The surprising poster child for ESG investing

With the bill for decarbonising the planet said to reach US$100-150 trillion, investors are being reminded that they will play an important role in changing the world, but not in the way they think.

In a recent investment seminar, Fidelity International’s portfolio manager, Kate Howitt, argued that due to the sheer cost of transforming the world, investors can’t be idealistic when it comes to fixing the problems of climate change.

Instead, she pointed to the importance of ‘olive companies’ – those that are brown now but have the potential to be green in the future.

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“We think there is going to be a huge opportunity in supporting the olive companies,” she said.

“So, companies today are making perhaps all their revenue out of selling carbon.”

While highlighting that from a traditional point of view they sound like the opposite of what investors should be looking for, Ms Howitt argued “the issue is these are the guys who can have the biggest opportunity to decarbonise in the future because of the brownfield potential”.

“So, the ability to repurpose existing infrastructure,” the portfolio manager continued.

Moreover, she opined that green companies alone will not have enough of an impact on the world to stop climate change.

“Maybe we should be supporting the green innovators. We need to be backing the solar companies, the wind companies, the companies coming up with great green tech innovation.”

“Well, that is part of it, certainly a lot of investment needs to go behind those companies, but that probably is not going to be enough,” she said.

However, with costs ranging from estimates of US$100 to US$150 trillion, the ability of these brown companies to repurpose assets and turn green will play a key role in the world’s climate solutions.

“So, from that point of view, it’s a company like Santos.

“It is selling carbon now,” she explained.

“It doesn’t seem like the poster child for ESG investing, but Santos is actually one of the world leaders in carbon capture and underground storage of carbon, and they are moving rapidly to figure out ways to decarbonise and repurpose from exporting carbon to exporting hydrogen.

“These are the companies we think investors should be backing.”

The portfolio manager also stressed the importance of differentiating between investments that are heading towards a net-zero path from those that aren’t, to ensure you’re investing in what she dubbed a “low carbon world”.

The surprising poster child for ESG investing
The surprising poster child for ESG investing
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

author image
Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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