Carbon finance is about more than just offsetting – making a proactive investment in public health, sustainable ecosystems and environmental education is its own reward.
Investors and businesses want to see their money go to sound businesses and good causes. Credit: “Caveman Chuck” Coker
Public appetite for responsible investment opportunities continues to rise, with £12.2bn now squirrelled away in pension funds labelled as ethical. This week sees the second National Ethical Investment Week marked across the country, a campaign designed to raise further awareness of Socially Responsible Investment (SRI).
The idea of doing your bit through placing investments in businesses working towards sustainable goals is really just an extension of the principle of conscious consumption – that is, paying attention to what you buy and giving preferential treatment to businesses that are smaller, local or independent. SRI takes the principle and applies it on a wider-scale, in a way that may appeal to a more traditional investor.
Just this week, Prince Charles, highlighted that companies with sustainable business practices and mitigation plans for an uncertain future deliver better long-term returns and are more protected from market shocks.
Indeed, fund managers are keen to communicate that ‘ethical’ can be smart, professional and profitable. SRI asset classes have returned three-year yields of 36%, where traditional funds have showed a more modest growth of 30%.There are two main types of “socially responsible” investment funds. The first takes a ‘do no evil’ approach, excluding all investments in ‘sin’ industries such as those producing arms, tobacco and alcohol. Another approach is more proactive, offering investments only in companies with a proven track record of social responsibility or who are involved in ‘desirable’ industry such as renewable energy generation.
What if you don’t have a couple of thousand burning a hole in your pocket? Is there any way of making a modest difference through investment?
Carbon offset programmes are just a different way of investing in sustainability programmes around the world.
The answer leads us to a third route – carbon finance. It is easy to dismiss ‘carbon offsets’ as a neat way of absolving individuals and businesses in the developed world of any responsibility towards habits and practices. But what actually happens when you ‘offset’ carbon?
Carbon offset companies use investment tied to your own emissions to fund projects that are proven to reduce or prevent an equal amount of carbon being emitted somewhere else. Projects might be based on renewable energy, reforestation or even efficient appliances. Once a project has been vetted to assess that carbon savings have been made that would not have taken place otherwise, it may ‘sell’ these carbon savings on through offset firms, packaged by the ton, and thus attain a sustainable stream of revenue with which to continue its positive work.
The ETA itself supports carbon finance, ‘offsetting’ the unavoidable carbon emissions arising from its own day-to-day business. Through its favoured offsetting partner, Climate Care, the company compensates for greenhouse gas emissions, but also makes a wider social contribution. ‘Offset’ programmes in developing countries can stimulate local economies, promote social cohesion and provide environmental education as well as having public health benefits. This is seen in Carbon for Water programmes, for example. These work to improve conditions in areas where water must be boiled to be safe for human consumption, often at the cost of deforestation for firewood, a process that reduces carbon absorption, threatens human health, and emits CO2.
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