Investing in Environment Sustainability and Renewables

Boris Petersik has been following the technology industry for the past thirty years as both a financial analyst and as an investor. Over the past decade he added renewable energy and electric mobility as part of his core investment interests and among other activities funded a start-up solar project developer in Singapore.

Although the fund started with a heavier focus on technology in 2017 Boris has more recently increased holdings which are aligned with sustainability goals in the environment, social and governance (ESG) spheres. He relies on publicly available ratings, checking for red flags as a screen, but also focuses on companies he knows adhere to the same priorities. The fund’s approach to sustainability investments used to lean more to companies whose activities support environmental sustainability. At the same time, Boris keeps an eye on broader ESG goals and would avoid those who may be delinquent in the spheres of governance and social responsibility. 

Whereas initial environmental sustainability investments focused almost exclusively on products, the fund has since taken a broader view of companies contributing to environmental sustainability in not only their core business activities, but also their operational approach.The journey from practices of the past to more sustainable ones is one that is still unfolding. To this end, companies taking advantage of sustainable solutions, who evidence a demonstrated commitment to improving the companies’ environmental impact that goes beyond simple statements and lip service, would similarly be viewed as potential investments.

This broader pool of potential investments extends to industries that may be seen as being part of the problem (eg green-house gas emitters) but are essential nevertheless. By focusing their efforts on leading environment impact improvements in their respective industries, they still make a positive difference. The same approach in converse has eliminated some investment opportunities in companies which may for example, be actively producing renewable products but do so in unsustainable ways or with scant management regard for supporting other elements of ESG objectives.

Companies operate in a complex matrix of national and regulatory environments which often dictate tactical and long-term business opportunities. It is therefore, important to look for consistency in decision making that align with the need for urgent environmental improvements and a change in the way things are done, whether they are already mandated today or will be in the future. 

Companies that have exposure to renewable energy or electric mobility, those that offer products that increase energy efficiency and improve the overall mix of the global economic activity, are obvious potential investments. Boris does not however ignore the companies that are central contributors to the challenge and will dive deeper in evaluating their efforts to innovate and improve their environmental impact. The fund looks at the vast majority of companies where environmental impact may not be a significant issue but where managements are nonetheless, taking innovative actions to materially improve their overall environmental impact.

Companies that manage to get ahead of the curve in terms of managing their broad environmental impact, be it through growth in revenues, improvement of internal processes or via the impact on their clients and supply chains, are companies that will come to define success and reap incremental financial returns over the long run. By de-risking their business models with respect to environmental impact, companies should see steadier future returns. One of Boris’s implicit base assumptions is that gravitation towards responsible investing will accelerate over the next 10-20 years, and the value of sustainable practices will increase.  This will evolve over time and a process of continued refinement in the analytical process will be necessary in order to turn up the investment gems of the future.