Last year I wrote about the need to bounce forward to evolve economies and eradicate the apathy and complacency about the risk of losing the natural systems we rely on. I was quite hopeful that as we recovered from Covid-19, we could bounce forward not back, and lock in new thinking and practices. But now, more than a year on, nothing has really changed. I am an optimist, but if humanity is to continue to live as we know it, then we need to elevate our sense of urgency and acknowledge the inevitable will happen if we don’t act now. We need to immediately effectuate the global goals as outlined in the Paris Agreement and the SDGs, and the finance sector has a key role to play.

There are various targets that have been committed to by governments, multi-lateral organisations and businesses around the world. Yet, we see many pledges for 2050, but there seems to be a lack of unified, plausible, and immediately actionable plans to achieve them. The finance sector in particular needs to take a credible position on how it intends to contribute. Sustainable investment has boomed in recent times, and it would seem that awareness of the urgent need to address the challenges through financial vehicles has risen. However, there are too many passive investments that lack an authentic sustainable purpose. Europe in particular has seen a large number of mainstream investment funds re-label themselves as Article 8 under the Sustainable Finance Disclosure Regulation without creating any real underlying changes. A number of asset managers have also signed up to the UN PRI and may even intent to become net zero, but they don’t vote for some of the climate resolutions at AGMs of investee companies. They might engage with management, but ultimately they will support a company’s resolution on climate change rather than push for stricter shareholder resolutions. It means that the investee companies don’t feel sufficient pressure to change. Interestingly, ultimate beneficiaries are now becoming more active too, and questioning investment strategies. Which is a great segway to my next point.

At the end of the day, it’s about investment choices; not only what you choose to invest in, but also how and what you choose not to invest in.

Investors and asset managers need to have active and credible vision plans that are informed by their own values, beliefs and scientific research, but at the same time they should be strongly aligned with transitions that have a much broader buy-in globally. And they have to translate the long-term visions and pledges into the medium and short term. For example, Triodos Investment Management has translated its strategy and set a clear path prioritizing three key global challenges: the energy transition; the food transition; and social inclusion. One of our investment projects is Giga Rhino, a utility scale Lithium-ion energy storage system, the most powerful facility in The Netherlands. The energy efficiency and energy storage capacity in this project is the missing link to making sustainable energy highly efficient and affordable. Another example is our commitment to promoting resilient and inclusive food systems by investing in European trailblazers that accelerate necessary change. We also recently invested in Koinworks, an Indonesian fintech company that helps retail individuals to channelise and diversify their money towards the underserved SMEs, which form the backbone of the country’s economy. In terms of investing in stock listed companies, we established a rigorous selection and asset management process. We do not rely solely on analysis from ESG data providers, but also do our own homework, engage with companies, vote at shareholder meetings, and challenge management when needed. Ultimately we vote with our feet and will divest if investees don’t deliver on the global long-term vision or if they start to act detrimentally.

At the end of the day, it’s about investment choices; not only what you choose to invest in, but also how and what you choose not to invest in. If you look at the top 10 holdings in our impact equities and bond funds there is very little overlap with general benchmarks and the funds of our competitors. Many of those have for instance significant exposures to listed Big Tech companies, which we have elected not to invest in due to data privacy concerns, monopolistic behaviour and other unsustainable characteristics. Others have a best in class approach, which allows them to invest in oil and gas companies, albeit those that do less worse than the others. The approach of these passive products is not authentically aligned with global climate action goals and will not lead to change. If you have an active sustainability approach, then you can really be a change maker.

I hold hope that we will not completely regress as we recover from the COVID-19 crisis and that we can create immediately actionable plans. It will be a bumpy road and we are likely going to see more (natural and social) disasters that will eventually create the urgency needed. Then change will accelerate building on the foundations laid by frontrunners. We have the capacities, the capabilities and the technologies and if we operate with an urgent response mindset, we can move quickly and be effective.

Jacco Minnaar is Chair of the Management Board at Triodos Investment Management.