Can Greta Change Business?

Our house is on fire, keeps reminding us 17-year-old Greta Thunberg. For the second consecutive year, the teenage climate activist has attended the annual World Economic Forum in Davos, spreading awareness of the threats that climate change poses, and demanding change from political and business leaders. In her speech, she once again warned the business world that time is running out to tackle global warming. “With today’s emissions levels, the remaining budget is gone in less than eight years. These aren’t anyone’s views, this is the science”, said Thunberg, citing a 2018 Intergovernmental Panel on Climate Change (IPCC) report. “I know you don’t want to report this or talk about this but I will keep repeating the numbers until you do.” Many political and business leaders have heard her repeat the research findings she backs up her speeches with, but who’s actually listening?

“I’ve been warned that telling people to panic about the climate crisis is a very dangerous thing to do. But don’t worry. It’s fine. Trust me, I’ve done this before and I can assure you it doesn’t lead to anything”, Thunberg opened her remarks with. However, this is not entirely true. As unhurried as it might be, big corporations around the world have slowly begun to realise that piecemeal commitments to sustainability no longer cut it with customers, shareholders and investors, and some have taken action already – tech giant Microsoft recently announced that the company will be going carbon negative by 2030[1] and last year, Amazon pledged to be net-zero by 2040[2], whilst also announcing a number of different sustainability goals, including being 100% renewable by 2030. However, Greta’s concern is that the CEOs of some of the world’s major companies are more concerned with their PR and reputation, and making their companies appear ‘green’, whilst actually not doing that much or acting too slowly on the climate emergency we have found ourselves in the midst of. “I still believe the biggest danger is not inaction, the real danger is when politicians and CEOs are making it look like real action is happening, when in fact almost nothing is being done apart from clever accounting and creative PR”, Thunberg pointed a finger at business bosses at the United Nations Summit in Madrid last month[3].

However, a small change or a slow change is better than no change. Investors are increasingly seen to drive change and demand more sustainable practices – and companies that fail to address the issue properly are likely to have their share prices punished. With many CEOs’ remuneration packages depending on share price performance, this is something they can’t afford to ignore.

Major investors on an international level are increasingly using positive screening and are disinvesting from companies which fail to meet the expected environmental, social and governance (ESG) criteria.

The world’s largest investment firm, BlackRock, recently announced they’re making climate change the company’s top priority moving forward[4]. Ahead of the World Economic Forum in Davos, Chief Executive and Chairman Larry Fink, who believes that we’re on the edge of a fundamental reshaping of finance, announced that sustainability will become BlackRock’s “new standard for investing”. “Climate risk is investment risk…Indeed, climate change is almost invariably the top issue that clients around the world raise”, Fink explained.

BlackRock is certainly not the only company which realises that environmental awareness is rapidly changing. Major investors on an international level are increasingly using positive screening and are disinvesting from companies which fail to meet the expected environmental, social and governance (ESG) criteria. On top of that, the number of indices and tracker funds that play into the ESG theme is rapidly growing. Data providers, for example, have started to provide companies with their ESG scores, so that investment and fund managers can assess whether to invest in them or not.

A recent study conducted by Morgan Stanley[5] showed that the appetite for sustainable investing is at an all-time high, with 85% of investors now expressing interest in sustainable investing, and 52% of the general population and 67% of millennials taking part in at least one sustainable investing activity – for example, investing in companies or funds that target specific environmental or social outcomes.

Although outsourcing your morals to an investment or fund manager could be difficult, as we all have different points of view, investing using ESG principles is becoming more and more widespread as more investors choose ESG benchmarks over traditional indices. Demand for shares in companies that do not meet the criteria decreases, whilst demand for those who do is on the rise.

77% of millennials cite Environmental, Social and Governance investing as their top priority when considering investment opportunities.

Another poll, conducted by deVere Group, found that 77% of millennials cite Environmental, Social and Governance investing as their top priority when considering investment opportunities. Whilst traditional factors – such as anticipated returns (10%), past performance (7%), risk tolerance (4%) and tactical allocation (2%) – play an important role in millennial respondents’ investment decision-making, they are no longer enough.

A shift is afoot and whether you’re a supporter of Greta or someone who passionately opposes everything she says, we can all agree that she is the accelerator of this shift. This young Swede and all of her millennial and Gen Z supporters have the power to influence business on climate change and if financial institutions, companies and agencies want to attract them as users or investors, they will need to decisively shift their priorities to match those of the generations of today. Going forward, more and more people will only support companies that are doing something to help the environment, so if businesses want to grab investors’ interest and stay relevant amongst their customer base, they need to move with the times and show that they truly care about the future of our planet by rethinking their policies and acting on climate change.

If there’s one thing that the attention Greta Thunberg has managed to attract, and the support she’s received from millions of people across the globe can show us, it’s that no one is too small to make a difference. Millennials and Gen Z are with Greta, supporting her fight for our planet, making changes to their lifestyles that can help the environment and investing in companies that care. Now, it is time for the business world to take action in the face of the climate crisis threat we’re all facing – and they need to do it now!

[1] https://www.forbes.com/sites/davidrvetter/2020/01/20/microsoft-is-going-carbon-negative-what-does-that-mean/#7c3a4ec8b130

[2] https://techcrunch.com/2019/09/19/amazons-climate-pledge-commits-to-net-zero-carbon-emissions-by-2040-and-100-renewables-by-2030/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAALjOacHuXdXPXqh7sYcxoI0rPqeuXbCMlGGsoXOY8vOSY18zyh3EDoSr_2OEtVU46tvfO6tn8P0iNelFkqxVLLiu7h1XLZTbW-VkgLrUgFso2FbslxXRSq38Zyw2A3rmDziooaS9KaXKzVWUmNhQDdLxhrOcqcjFj4TN0j6dyKVI

[3] https://www.cnbc.com/2019/12/11/reuters-america-activist-thunberg-denounces-clever-accounting-in-climate-fight.html

[4] https://www.finance-monthly.com/2020/01/blackrock-climate-risk-is-investment-risk/

[5] https://www.morganstanley.com/press-releases/morgan-stanley-survey-finds-investor-enthusiasm-for-sustainable-