Celebrating London Climate Action Week, this article features as part of IFA Magazine’s editorial campaign throughout this week, which aims to highlight key issues, news and views in the field of climate action.
Yan Swiderski, co-founder of the Global Returns Project
London has long been a global centre for finance. In the coming decades, however, the city’s economic relevance will hinge on financial innovations to address the Climate Crisis.
Many in the financial services industry understand that sustainability is important, advocating ESG strategies. But more must be done to regenerate the planet beyond the capabilities of ESG alone. This London Climate Action Week, we have a powerful opportunity to move London from a centre for sustainability to a centre for symbiosis – active regeneration of the biosphere.
Sustainable investing is increasingly popular. But many sustainable strategies fail to deliver on environmental promises. Last August, for example, InfluenceMap assessed equity funds specifically marketed using ESG- and climate-related key words. These funds had over $330 billion in total net assets. 593 of the assessed funds fit within a broad ESG category. Of these, 71% had a negative ‘Portfolio Paris Alignment’ score, indicating the companies within their portfolios were misaligned from global climate targets.
Moreover, critical climate solutions lie beyond even the most effective, transparent approaches to sustainable investing. Market activities struggle to support vital measures such as producing data on deforestation in our economies, enforcing environmental law or protecting biodiversity. These solutions are most effectively delivered by climate not-for-profits.
This London Climate Action Week, you can think beyond sustainability and towards a symbiotic relationship between wealth management and the biosphere. Symbiosis, of course, means a mutually beneficial relationship. Embracing symbiosis within wealth management involves regenerating the planet more directly than ESG, creating a more circular relationship between finance and the biosphere.
To support regenerative activities, clients can contribute a tiny proportion of their portfolio each year to climate not-for-profits. While these organisations do not deliver financial returns, they deliver real and identifiable ‘Global Returns’ – that’s our term for the enhancement and protection of the biosphere. Contributing to these organisations is a rational investment decision. All our investments are less risky when we enhance and protect the biosphere.
Financial advisers have an opportunity to innovate. Incorporating climate not-for-profits into normal financial planning helps you meet client demand for climate-conscious investment strategies. And if London embraces this innovation, it can shift from a centre for sustainability to a global centre for symbiosis within finance.