How can Christian investors respond to climate change?
This week in Glasgow, Scotland the rain has been falling in a deluge of Biblical proportion but the mood has been festive. Tens of thousands of people from around the world and over 100 world leaders and heads of state have gathered for COP26, the international climate summit.
Many Christians are at the forefront of the movement challenging governments to urgently address the climate crisis. You might be surprised to know that the most recent report of the United Nations Intergovernmental Panel on Climate Change is dedicated to an evangelical Christian scientist, Sir John Houghton. He wrote that ‘the root problem of climate change is sin. Looking after the Earth is a God-given responsibility.’
‘the root problem of climate change is sin. Looking after the Earth is a God-given responsibility.’
- Sir John Houghton
Why should we care about climate
According to a 2020 report by the World Meteorological Organization (WMO), the global mean surface temperature last year is now 1.2°C warmer than the pre-industrial baseline (1850-1900); while the most recent decade, between 2011 and 2021, was the warmest on record. And this is beginning to have devastating consequences for tens of millions of people around the world - especially those in the poorest countries.
Worldwide, the number, frequency and duration of natural disasters has tripled over the past and there is strong evidence that it is linked to climate change. Oxfam estimates that more than 20 million people are being forced from their homes by climate change each year. In 2021 an unprecedented heat wave occurred in the northwest of the US. The heatwave brought temperatures close to 50 °C to many areas that generally do not experience such heat like Portland, Seattle, killing 500 people. The heat wave was made 150 times more likely by climate change. Meanwhile the western states experience the most severe drought in the last 500 years.
Sub-Saharan Africa is being hit the hardest. Hundreds of millions of people depend on rainfall to grow their food. Maize crop yield could decline by 24% as early as 2030 under a high greenhouse gas emissions scenario, according to a new NASA study. If trends continue they will experience increased drought and famine. Temperatures in some parts of Africa, which are already intolerably hot, are predicted to rise by five degrees or more and will become unlivable. All this will lead to social upheaval and mass migration as people flee to more hospitable places.
The focus of the COP26 Summit is on what action needs to be taken by governments and business to prevent increased climate change. “Limiting warming to 1.5° C is possible within the laws of chemistry and physics, but doing so will require unprecedented changes,” said Jim Skea, co chair of the Intergovernmental Panel on Climate Change (IPCC), the world’s foremost authority for assessing the science of climate change
Increasingly investors are proactively addressing the risk of carbon producing assets in their portfolio. A group of over 450 leading investors, including BlackRock, Bank of America and HSBC, have formed the Glasgow Financial Alliance for Net Zero (GFANZ). At COP26 they announced commitments of over $130 trillion of private finance to transform the economy for net zero by 2050. Europe’s largest pension fund, ABP, announced this week that it would be selling its €15-billion of fossil-fuel stocks. Meanwhile, 72 faith-based institutions, announced the largest-ever joint disinvestment from fossil fuels by religious organisations, and represents more than $4.2 billion in financial assets.
But also ‘There are many opportunities associated with the transition to a low carbon economy.’ Karen Shackleton, founder of Pensions for Purpose and a recent speaker at the Faith Driven Investor conference says; ‘Some of those will be obvious: renewable energy, vertical farming, and sustainable fabrics, for example. I have never been of the view that investing in environmentally supportive companies automatically means giving up returns.’
‘Some of those will be obvious: renewable energy, vertical farming, and sustainable fabrics, for example. I have never been of the view that investing in environmentally supportive companies automatically means giving up returns.’
What are the investment implications and how should faith driven investors respond?
Christian investors have both a moral and financial imperative to ensure that their investment strategy incorporates climate change. From a moral perspective, we want to ensure that we are good stewards of creation and that all mankind are able to live flourishing lives. “Be fruitful and multiply. Fill the earth and govern it. Reign over the fish in the sea, the birds in the sky, and all the animals that scurry along the ground.” Genesis 1:28 (NLT) From a financial perspective, climate change represents a considerable risk to our investments as well as an opportunity.
1. Understand the science and theology
Some Christian’s remain skeptical of climate change. In America, only 28% of white evangelicals believe that humans contribute towards it. Take the time to engage with what Scripture has to say about creation care. The Evangelical Christian Climate Initiative statement, which was affirmed by hundreds of evangelical Christian leaders including Rick Warren of Saddleback Church, is a good place to start. Also listen to this challenging FDI podcast by Tim Mcready, CIO at Brightlight.
2. Mitigate its impact on your portfolio
Review your portfolio. Which assets might be adversely affected - whether agriculture affected by changing weather, fossil fuel impacted by regulation or infrastructure at increased risk of floods or fire. How will customers (God’s people) be adversely affected? How might you mitigate these risks? Can you influence this or do you need to divest?
3. Proactively identify new innovations & opportunities
Over the next 30 years the global economy will shift to become carbon neutral. Increasingly, governments are adopting regulation on some industries, while creating incentives to invest in this transition. Are there new industries (renewable energy, regenerative agriculture) or technologies (batteries, electric vehicles, AI) that you should be investing in?
17th November - Investor call on Climate Investing
Join us on 17th November (12pm EST, 4pm GMT) for a call about Climate Investing. It will feature Innovest which advises fund managers on impact, Fortis Green Renewables, an African fund manager focused on solar, and Epishine, a Swedish battery technology company. Add to your calendar here.
A creative witness
As the rain falls, a harbinger of things to come, let’s not be like the skeptics of Noah’s time. Christian investors have an opportunity to provide creative witness to God in an increasingly hopeless world as we seek to be good stewards of the Earth and the capital we have been entrusted with. In the words of the prophet Amos “Let justice roll on like a river, righteousness like a never-failing stream.” Amos 5.24