Investing with a Climate lens

June 22, 2019

I’m always amazed by climate change deniers. The science of climate change is not only well established, it’s also logical and easy to follow.  The reason gases that contribute to global warming are called ‘greenhouse gases’ is that they trap heat in the earth’s atmosphere and that warms the surface temparature. I guess I’m confused about what there is to deny.

But this post isn’t for them, it’s for people who have accepted fact-based evidence and are working to support the Sustainable Development Goals defined by the United Nations. These goals, while excellent and clearly defined, have an implicit and fundamental flaw: they ignore – or at least don’t make explicit enough - the fact that we only have the resources of a single planet to work with.

In other words, we need to prioritize the SDGs if we want the entire planet to survive their successful implementation, rather than just picking favourites or trying to tackle all of them at once.

That’s why, although we believe all the SDGs are important, our mission and primary investment goal at Red Rocks Impact is to reverse global warming to protect our biosphere.

Image credit: Stockholm Resilience Centre

Does this mean support for SDGs that improve quality of life are unimportant to our investment strategy? No, it does not. Looking at access and quality of life with a climate lens, our investment portfolio includes solutions like solar energy and 2nd life batteries to power homes and small businesses during black outs. Specifically, we look for systemic solutions that can scale for maximum impact.

For example, we don’t ask how we can help end hunger, which is one of the more critical societal SDGs. Instead, we ask how we can help end hunger sustainably from a climate perspective, which leads us to investment opportunities around plant-based diets and sustainable agriculture in the near-term.  

Longer term it may include investment in women’s education and empowerment, in order to decrease birth rate while counteracting traditional testosterone-led business models.

Similarly, we don’t invest in solutions that provide access to energy, water, or critical services in emerging markets unless the solutions are also sustainable, scalable and systemic. This approach tries to ensure we don’t inadvertently accelerate climate change with stop gap solutions like fuel-burning generators, which contribute heavily to global emissions.

We don’t have all the answers but when trying to solve a problem or set of problems, it’s important to frame your goals clearly to create an impactful outcome. We believe we can make more and faster progress on all the SDGs by applying a climate lens to all impact investments.

Here’s a high-level overview of how we do it, using resources like Project Drawdown to get informed about interesting solutions and potential investment areas that support decarbonization.

‘I’m not an impact investor but I want to help protect our biosphere.’

There are many ways individuals can help mitigate climate change – for example, by driving and flying less and eating less meat - but the most impactful solutions are systemic and scalable.  That means companies must shift toward improved materials management, more sustainable supply chains, cradle-to-cradle design, use of renewable energy in manufacturing, minimized and recycled packaging, and a higher respect for communities, habitats and natural resources.  

As a consumer, you can drive businesses in the right direction by making more informed and sustainable buying decisions.  Or, if you’d like to support an organization that takes market-led action to protect natural resources and reverse global warming, check out Global Canopy.

Laura Schroeder

Making money do more....