Al Gore, a former US presidential candidate who now chairs an investment management firm, has thrown his weight behind sustainable investment.
The vocal climate change campaigner says there is a strong case for sustainable capitalism and that it would increase investment returns. He also says fiduciary managers would be failing their fiduciary duty if they ignored sustainability factors.
Gore, who chairs Generation Investment Management, a firm with offices in London and New York, has published a white paper on the issue through The Generation Foundation, an advocacy group linked to the management company.
In the Allocating capital for long-term returns
paper, Gore warns of unabated carbon emissions and says the transition to a low carbon future will revolutionise the global economy and present significant opportunities for superior investment returns.
However, investors must acknowledge that carbon risk is real and growing.
He advocates the use of sustainability analysis to enhance investment returns, and says this can be used to understand the drivers of return for a company, a portfolio or an asset class.
Analysis would cover product innovation, executive compensation, and selling practices, among other factors.
In terms of fiduciary duty, he argues that the active decision to ignore sustainability factors may be a breach of fiduciary duty, especially true when assessing the impact of environmental and social governance on the financial performance of investments.
“As the context of business and investing shifts, understanding the economic benefits of a more sustainable form of capitalism has become even more critical,” says Gore.
He says this has significant implications for asset owners, asset managers, corporate executives and other market participants seeking to grow successful businesses.
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