Book Review: Investing to Save the Planet (Alice Ross)Matthias Krey
Title: Investing to Save the Planet
by Alice Ross
Penguin Business, 240pp., £14.99
In the summer of 2019, few people saw much of a relationship between climate change and equity investing. A handful of funds, notably Impax and Montanaro, had built investment strategies around sustainable investing, but these were seen by the wider market—to the extent that they were recognized at all—not as the vanguard of a new era of investing but as canaries in the financial coal mine. Among those paying attention was veteran Financial Times journalist Alice Ross, whose Investing to Save the Planet, published in November 2020, remains a vital, accurate, and eminently usable guide to the topic.
Ross marks 2019 as “the year the world woke up to climate change,” and indeed, the investment community has begun to respond, if not in practice, then at least in word. Environmental, social, and governance factors—the famous ESG—now have a widely recognized place in the decisions that guide capital markets. Fund managers and private wealth managers, investment banks, pension plans, and private investors now routinely include ESG in their investment analyses, and companies themselves now regularly tout their ESG credentials. Ross notes that by 2020, the UK’s Department for International Development reported that “68 percent of UK savers wanted their investments to consider the impact on people and planet alongside financial performance.”
More than an Introduction
Investing to Save the Planet is written for individual investors. It succeeds admirably in its goal of providing a concise, approachable introduction to sustainable investing without rounding off any important points.
Its briskly paced chapters intersperse an impressive array of data with personal stories and anecdotes. This is more than just feel-good stuff. Readers drawn to this book will likely have deeply personal reasons for valuing ESG, and the personal narratives included here place the quantitative data in a valuable and nuanced context.
Each chapter closes with a helpful guide gathered under the heading “What Should I Do?” Reflecting her knowledge of her readership, Ross offers separate lists of possible actions for low-, medium-, and high-risk investors.
Ross reminds readers to consult a fiduciary or financial adviser throughout the book, perhaps even more helpfully in the long view of things. That’s excellent advice, and it underscores the impression that Ross intends this book to be truly and lastingly helpful, not a source of false confidence or frustration.
The perils of Greenwashing
The increased emphasis on ESG by publicly traded companies is not evidence of some grand moral awakening: businesses are simply following the money. In 2019, investment in US-based sustainable funds quadrupled in 2019 to more than $20 billion, while European funds took in more than six times that amount.
Many fund managers are content to tout their ESG credentials without truly living up to them. Ross notes that “many fund managers have been quick to piggyback on the Paris Agreement,” while the UN’s own Sustainable Development Goals logo has proven “particularly impactful in marketing materials.”
This is evidence of greenwashing—whitewashing with an environmental pose—and Ross is especially keen that readers see through it. She reminds readers that only a skeptical eye and a healthy dose of research can cut through the misinformation.
Greenwashing, it turns out, is often surprisingly easy to disprove. Citing Morningstar data, for example, Ross demonstrates that only 40% of companies claiming to have abandoned fossil fuels have done so. Solar power, often used as shorthand for climate resiliency and environmental friendliness, relies on minerals that must be mined at a sometimes-devastating cost to the environment. These observations, and Ross’s exhortation to readers that they apply similar rigor to their own investment decisions, are highly valuable today and should remain so for years to come.
The Good News
Despite the fog cast over the sustainable-investment field by greenwashing, retail investors have quite a few options to direct their money toward demonstrably climate-friendly companies. An especially helpful three-chapter stretch begins with a reminder to always develop your own investment strategy, rather than borrowing from a friend (or, heaven forbid, the internet). Responsible investing is an ethical act, and while we may agree on most things, our ethical codes are uniquely ours.
On a more bracing note, Ross observes that simply divesting one’s portfolio of the worst offenders is not nearly enough. She quotes Bill Gates on the matter, who said in 2019, “divestment, to date, probably has reduced about zero tons of emissions.”
By the same token, Ross provides compelling evidence that a strict focus on companies that contribute to a healthier environment is entirely consistent with strong returns. Better yet, such investment strategies may help investors discover ground-floor opportunities for some of the best-performing companies in the near future.
The Way of the Future?
While Investing to Save the Planet is a highly commendable introduction to sustainable investment and still among the best of its kind in the field, it shares a weakness with similar titles. As time goes on, the line between sustainable investing and sound long-term investing will continue to blur. As climate change begins to render some industries untenable under their current operating terms, the notion of climate-friendly investing itself is becoming quaint.
At the dawn of the Agricultural Revolution, fortunes were made on mechanical reapers and other farm equipment. Early investors in factories, steel mills, and railways reaped enormous benefits as the Industrial Revolution spread. Society benefited as well, at least at first. Now that mass industry has overgrown its usefulness and threatens life on earth, a new socioeconomic turn is in order. The smart money is now green. Investing to Save the Planet is an exemplary guide to ensuring that your investments prosper along with the planet.
Next stop: Pure Climate Stocks
I have thoroughly enjoyed reading this book because it is entertaining in the best sense and profound at the same time. I can recommend it as a basic guide to anyone wanting to invest money in a sustainable way. Alice Ross puts the finger on the greenwashing that is going on in the financial industry but does not fall short of clear guidance on investing for a cooler planet. She wrote a great motivational piece on investing in Pure Climate Stocks – those companies that make 100% of their revenue from products and services that bring us closer to net-zero by 2050.
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