Andrew Pitt: Complex climate questions for charity investors

14 Nov 2023 Expert insight

Rathbones Group’s head of charities discusses whether the benefits of decarbonisation could outweigh the damage to biodiversity…


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Charities are under increasing pressure from donors, partners, staff and other stakeholders to contribute to the transition to a greener economy. This involves measuring and reducing their operational footprints, as well as those of their investment portfolios. And this, in turn, demands grappling with many complex questions. These include whether the benefits of decarbonisation will outweigh its sometimes adverse impacts on biodiversity.

Take, for example, recent debate over the potential damage to marine ecosystems from deep-sea mining for vast amounts of critical minerals. Dozens of British scientists recently urged the UK government to support a moratorium on this mining over concerns about its impact on the environment. It’s estimated that the oceans absorb around 25% of man-made carbon emissions each year, while also supporting the livelihoods of more than three billion people around the world.

It’s not surprising that many people concerned about the environment have eyed with apprehension the prospect of even more damage to marine ecosystems than has already been done by humankind through the practice of deep-sea mining. However, given the global shortage of critical minerals essential to the net zero transition, many argue that the exploration of the deep seabed, more than 2,000 metres below the ocean’s surface, is a step worth taking to address this shortfall.

Can we have our cake and eat it too?

A recent report by the Energy Transitions Commission (ETC) suggests that, to a certain extent, the transition to a green economy could allow everyone both to have their cake and eat it. The ETC is an international think-tank focused on combining economic growth with climate change mitigation.

According to the ETC, producing all the materials needed to build a low-carbon energy system would emit 15-35 gigatonnes of CO2 equivalent over the next 30 years. This figure is significant, especially amid the backdrop of an ever-shrinking global carbon budget (the limit of total carbon emissions to stay within agreed targets). However, these emissions pale in comparison with the estimated 41 gigatonnes that a fossil fuel-based energy system would emit each year on average over the same period.

These decarbonisation-related emissions would largely be a one-off, assuming improvements in recycling and other progress towards a more circular (less wasteful and polluting) economy over that time period.

What’s more, assuming projects are managed responsibly, the way in which new renewable energy infrastructure interacts with the natural environment will differ considerably from the way in which oil rigs or refineries do. CLEANaction — a partnership of concerned organisations aimed at protecting nature during the energy transition — has concluded that, from sourcing raw materials to final operation, all forms of renewable power are better for nature than fossil fuels. 

Crucial role for shareholders

This doesn’t suggest that the transition to a clean energy economy will be free of challenges and difficulties. As the controversy surrounding deep-sea mining shows, many trade-offs must be weighed up along the way. 

It is within this context that we at Rathbones believe our engagement with the companies we invest in on behalf of our charity clients is crucial. Shareholders have an important role to play in challenging companies to manage the tensions inherent in an energy transition that respects the natural environment. 

That’s why we launched an engagement campaign at the start of the year that aims to press 52 companies within our investment portfolios to demonstrate that they’re effectively measuring and disclosing their impacts on nature and assessing the risks that nature and biodiversity loss poses to their businesses. This is also why, through a combination of individual and collaborative engagement efforts, we continue to challenge the companies we invest in to do what’s in their power to support climate action.

Any views and opinions are those of the author, and coverage of any assets in no way reflects an investment recommendation. Past performance should not be seen as an indication of future performance. The value of investments and the income from them may go down as well as up and you may not get back your original investment. Fluctuations in exchange rates may increase or decrease the return on investments denominated in a foreign currency.

Andrew Pitt, head of charities at Rathbones


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