Sandra Carlisle, Jupiter Asset Management’s new Head of Sustainability, has a career spanning three decades working for global investment banks and asset managers, including 16 years dedicated to responsible investment and ESG. She discusses her role, bad capitalism and how investors are evolving to address climate change.

Jupiter’s investment teams have looked at ESG (environmental, social and governance) issues within their investment process for a long time. Part of my agenda is to make sure that we inform our clients and our wider stakeholders better about how we think about ESG issues.

I believe that ESG is an analytical framework not a fund or security. It is a way of looking at the world that takes account of environmental, social and governance issues and tries to price them. We are thinking about them as investment risk and opportunity.

Another part of my agenda concerns Jupiter as a company. As a responsible business and a sustainability leader, we must continue to behave in the way that our stakeholders expect a responsible business to act. It is absolutely thinking about the triple bottom line: people, planet, profit.
Bad capitalists
Historically, the investment industry have been bad capitalists. I mean that we have not been paying and accounting for the planetary resources we have used. We have exploited people and the planet in the interests of profit maximisation and generating returns. Now, we must do more to generate sustainable investment returns – sustainable in terms of traditional cash flow metrics and the planetary and human resources we are using to generate those returns.

There is a recognition in the industry that if we do not think about the consequences of what we are doing on the wellbeing of the planet and people then we are heading for mass extinction. We know the next decade is critical in terms of shifting the system to allow us to remain within safe boundaries of global warming.
Small pond
I have been involved in sustainable investing since 2005. It was a very small pond back then. My conclusion was that investing sustainably was a better approach to investing, and if we didn’t start doing it, regulators or policymakers would impose it. The timing was good because Germany had recently passed the Renewable Energy Sources Act, which triggered a wholesale shift for renewables. Capital markets are efficient if they spot an opportunity, and we saw a wave of IPOs for solar and wind companies. It was a clear signal about the future opportunity for climate-based investing, underpinned by regulation and policy.

The Global Financial Crisis brought a wave of new banking and capital regulations, and with the climate crisis, we have seen a great many regulatory and policy interventions There will be more because regulation only goes one way.
Big shift
The other thing that has happened is that capital has shifted to investing sustainably because of demand from a wide range of investors: institutional, endowments, family offices, retail investors. For example, $1 of every $3 invested in the US under professional management is sustainably invested.1

What will the industry look like in 10 years? Perhaps $2 or more of every $3 will be invested sustainably. The direction of travel is clear. In 2005, investing in onshore wind was pretty esoteric even though the technology was old — a wind turbine is a windmill. Onshore wind is now a mature technology, and it is cost competitive with fossil-fuel generation.
Nature-based investing
I believe exciting new technologies and investment opportunities will emerge in the next decade. One area is nature-based investing, addressing biodiversity and ecosystem protection and including sustainable and regenerative agriculture and ocean conservation.

We see innovation in companies developing vertical farming and lab-based meat. We must feed the planet but do not have to use intensive agricultural practises. Investing in our oceans is important. For example, a company is building artificial reefs in Mexico to reverse coastal erosion and rehabilitate fish stocks, and also to protect the local economy and jobs in the tourism industry.

I do not see tension between planet, profit and people. I see natural alignment. If our clients, for whom we are investing, can’t enjoy the benefits of their retirement because of climate change or ecosystem degradation, we will have failed as investment professionals. We are working extremely hard to ensure that does not happen.
1 The US Forum for Sustainable and Responsible Investment 2020 Trends report

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