Like many others, I headed to Norway this summer. One of the first things to strike you is the excellent electric vehicle (EVs) infrastructure. Everywhere you look there are ample charging points – the signs of a unified and supportive government taking meaningful action. And the efforts are paying off. Nine in ten (89%) cars sold last year were EVs. Better still, 88% of the energy is hydroelectricity. While Norway is still not perfect, the country is a powerful reminder that when we work together, we achieve goals quickly.
Coming back into the Netherlands it's a different story. The government is grid-locked, with no decisions being made at all. While the world burns, the state's ability to act has frozen. Until October's snap elections, we are in a numbing state of limbo. Growing waves of populism are also rising, further clogging progress with misguided anger and scapegoating. We're pulling in different directions, and nothing is happening.
A little less conversation ...
Across the world, the pattern repeats. Decisions like whether to ban new plastic are already taking five years and counting.That's 2.1 billion tonnes of plastic created since the conversation started – equalling the weight of 467,000 adult elephants. While committees dither, plastic pollution is flowing into our water, destroying our environment and even finding its way into our bodies through microplastics.
Like so many others, I am dismayed at how incredibly slowly our decision-makers are moving - especially as fossil fuel interests block the path of sustainable progress. At least 234 fossil fuel and chemical company lobbyists registered to participate in August's Plastics Treaty negotiations, with the final number of participants outnumbering scientists by four to one. "Dragging the process" isn't a side-effect, it's clearly the overarching strategy and end-goal of fossil fuel interests.
Let's be real, we don't need more plastic. There are already plenty of alternatives to both plastic and fossil fuels, my teams analyse them every day. The plastic problem was caused by humans, and it will be solved by them too. The real issue is chronic, devastating and deathly inaction at the highest levels.
Frankly, there is no point waiting for the decision-makers and committees to finish their conversations, we don't have enough time. Thankfully, as investment managers we don't need to.
While lobbyists talk and politicians govern (or not), asset managers are the ones deciding where to put investment. As the holders of the world's wallet (pension fund managers control over USD 58.5 trillion – around two thirds of global GDP), the responsibility to invest in the strongest assets is already ours.
We don't listen to the lobbying; we look at the facts. And we don't drag the process; we act with confidence.
... a lot more action please
I am not asking any asset manager to be "woke". If terms are triggering or unnerving to clients, don't use them. I am instead calling on all managers act on our duty to make robust investment decisions.
While politicians may think in four-year instalments, we strategize for the long-term. As Warren Buffet himself says, "Our favourite holding period is forever". If you seriously believe that 40, 50, 60 years from now, the world will still be running on fossil fuels and single-use plastic, and you are transparent with your clients about it, then I suppose you must do what you believe is correct.
Today's best available evidence points to oil reserves running dry in just 51 years. This calculation did not factor-in diesel-intensive data centres fuelled by AI demand, never-ending disposable plastic nor the rise of devastating conflicts, which add further strain. Coupled with this, consumers are clearly demanding an end to oil, with several people imprisoned for impassioned protests. There is a glaringly obvious preference for clean energy, which is both cheaper and pollutes less.
Apply every single risk lens you can think of. Business risks, consumer risks, currency risks, event risks, market risk, legislative risks, liquidity risks, regulatory risks, reputational risks and more. Again, and again, and again, sustainable assets are better risk-adjusted long-term investments. The clue is in the name. It is so obvious, it doesn't really need to be stated.
I'm very proud to say that our pension funds agree. And they're taking action. Dutch fund PFZW recently decided to pull EUR 14.5 billion away from Blackrock's passive investments, amid concerns that the world’s biggest asset manager isn’t acting in the best interest of its clients when it comes to climate risk. Spokesperson for PFZW Ellen Habermehl commented, "For the next five years, we aim for a better balance between our need for good returns, acceptable risks and sustainability". This is fiduciary duty in action.
As more risks unravel, more pension managers will redirect capital to less exposed assets. To play our part, we're putting our focus into creating large-cap impact equity funds, ideally suited to diversify long-term retirement portfolios. In lockstep with leading institutional investors like PFZW, we're making significant strides.
Next time you hear, Elvis sing "a little less conversation, a little more action please", think of the pension funds and investment managers continuously shielding retirement incomes from risks, even as governments and committees gridlock.
Our loyalty is to our clients. And now more than ever investors cannot afford inaction.
