In the 28th episode of the OppenheimerFunds World Financial Podcast, Head of Sustainable Investing Aniket Shah discusses a wide range of issues that investors are working through as they seek to allocate capital responsibly.
On Building Sustainability into Economic Development Goals
Before joining OppenheimerFunds, Shah worked with the United Nations and participated in the development of the Paris Climate Agreement. In the podcast, he discusses how the ambitious plan for the world to hold the increase in global average temperature to two degrees Celsius above pre-industrial levels requires the decoupling of economic development and carbon emissions. China, for example, is the world’s largest investor in renewable energy on an absolute basis, but is also contending with a need to maintain its 6% to 7% annual growth rate while weaning itself from coal, which currently supplies 70% of the country’s energy.
On the Challenges of Being an Early Adopter
Environmental technology is developing at such a rapid pace that it may be hurting widespread adoption as companies and consumers find it a challenge to keep up. Solar energy offers a good example: Many consumers fear that solar panels added to a roof today could be obsolete within a few years. Indeed, while the cost of solar has declined precipitously in the last decade, penetration remains low ̶ it accounts for only 0.3% of the world’s total energy production. As Shah explains, environmental tech is an area that demonstrates the power of the partnership between capitalism and technology. The question that remains to be answered is how to implement it in a meaningful way across a global economy.
On Being a Productive Allocator of Capital
Sustainable investing is a highly nuanced space. Some investors espouse the benefits of divestment, or withdrawing capital from companies in objectionable industries such as oil and gas. But the fact is that large oil and gas companies could become leaders in renewable energy transition. As such, simple divestment may not be the most effective way to encourage change. A more productive way for an allocator of capital to operate may be to engage actively with these companies to encourage positive change.
For more perspective from Aniket Shah, listen to the podcast, Sustainable Investing: A Quiet Revolution.
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value. Companies with favorable ESG practices may underperform the market as a whole.
OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.
These views represent the opinions of OppenheimerFunds’ Head of Sustainable Investing and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.