Monthly commentary

This is nothing to do with the potential policies of a new Home Secretary! I am not planning to comment on what could be a different environment for investors for a few days yet.

As others have pointed out, there are at least 2 versions of Boris Johnson; the lying, casually racist egotist and the diffident ‘one nation’ Conservative. The latter might be a concept being acted out on the advice of Dominic Cummings and co. but it could also be the driver of Government policy. We need to be a little more certain about that and we will be better informed over the next few days.

There are many issues that will be troublesome in months to come, aside from the actual delivery of Brexit, which will not be wholly positive in my judgement. The split of the UK into nationalist groups, especially in Scotland, will create some new issues for investors, especially as many top fund managers are located North of Hadrian’s Wall!

This piece is a seasonal one, drawing your attention to the fact that the investment industry does not find the urgent message being so ably promoted by an autistic teenager as being either trivial or troublesome. There has been for a very long time an enthusiasm for sustainability as an investment criterion. In a world were ‘factor’ investing is becoming the norm, sustainability (in global terms, not internally) of business operations is certainly one factor investment managers take into account.

Global climate change is perhaps the most significant threat to environmental sustainability. I think very few people doubt it is happening, although some well qualified and well informed people argue that the cause may not be so simple as C02 emissions. We do not need to take sides in that debate as investors, but we do need to know how investment managers are tailoring their plans to allow for the CO2 emission reduction targets that are going to be imposed on businesses either by regulation, or by investor activism.

Even if CO2 emissions are NOT the cause of global warming, we are in a ‘Millennium Bug’ situation where vast sums of money will be re-directed as a result of a perceived risk. Investor behaviour has been gradually changing to an ‘anti-carbon’ stance for some time now.

It is well know that even most managers of funds badged as Sustainable or having a high ESG score (environmental, social, governance) do not really have the structure in place to challenge company boards on issues as specific as carbon emission targets. WHEB are a creditable exception to the generally rather wishy washy fund manager approach to getting to grips with issues of corporate governance, which is one reason why I invest in their Sustainability fund.

Seb Beloe, one of the WHEB fund co-managers has joined with other managers for Liontrust, Montanaro and Janus Henderson in supporting an initiative called NZC10 (or Net-Zero Carbon 10). This is a demanding target which requires 10% or more of portfolio assets to be invested in firms that are carbon neutral or have strategies that will achieve net-zero carbon emissions by 2030. The standard is expected to tighten over time.

Most readers of my musings will be of an age where a global climate crisis is worrying more in the context of later generations, like children and grandchildren. But you may be surprised how quickly climate change impacts your life.

Personally, I have along with a large number of people across the world not supplied by municipal water (and some who are) been obliged to spend out this year on drilling for deeper ground water to supply my everyday life. That was a direct result of record warm dry weather in North Eastern Europe. Extreme weather is not so unusual, it seems to me.

I will write more in depth on this subject in the future, It is a theme that cannot be ignored by investors.