Managed funds: Max Raiz

“Green” investments offer a safe haven from future climate catastrophies

Ihave lived through a number of distressing economic phases, ranging from the Asian debt crisis in the late 1990s, to the dot-com boom and bust of early 2000s, to the GFC of 2008 and now the Covid-19 pandemic.

All but the current crisis were financial in nature and central governments and central banks remedied their impact through fiscal and monetary manoeuvres. The jury is still out on whether the fiscal and monetary remedies will be sufficient to neutralise and reboot the economies that currently remain in the unceasing grip of the pandemic. I am hopeful, as are the markets!

I am alarmed by the mismanagement of Covid-19, however, by governments all over the world. I am increasingly concerned about how ill-prepared we will be when climate change catastrophes start to rock our world as their impact on human life will be far more disastrous than anything we have seen previously.

The tacit or more overt acceptance by many countries that there is not much that can be done but to allow the pandemic to run its course is evidence that governments can and will become Darwinian in their approach to handling future climate-related catastrophes.

But it doesn’t have to get to that. As investors we need to start relying less on governments for direction and start taking charge of the climate change action through allocation of capital to climate neutral or climate-friendly assets. This re-allocation of capital doesn’t have to be entirely based on altruism but simply intelligent investing on the traditional risk-reward metric.

As the climate risks start to play out into sizeable catastrophes, these climatefriendly assets will become natural safe havens for investors fleeing from assets causing climate change. My sense is that climate catastrophes will eventually bring on the urgency and force policy makers into action for the abandonment of assets and commercial activity that harm the climate and our planet’s ecosystems.

On the other hand, insurance companies will raise risk premiums or, worse still, stop insuring adverse assets. The implication for investors seeking green assets during or after a catastrophe will be to pay hefty premiums. The smart capital with a 10-year or longer outlook is already moving in the direction of climate-change-friendly assets before the tidal wave of mainstream investors follows suit.