27 Jun Michael Jantzi
Michael Jantzi on tackling climate change through investments
In this exclusive series, the team behind Genus Fossil Free speaks with high-impact leaders at the heart of where climate change meets investments. Know someone we might want to speak with? Suggest them in the comments below or email email@example.com
Doing good is good business. It’s a philosophy that’s making headlines and fueling debates between business leaders about what next-gen business looks like. In the meantime, Michael Jantzi, CEO of Sustainalytics, has been approaching the situation in a different way: by conducting research on the environmental, social and governance (ESG) aspects of corporate performance, and making it available to institutional and retail investors around the globe to help them make more informed investment decisions.
Jantzi weighs in on the trends at the intersection of climate action and investment – fossil free investing, the current direction of growth, and what’s driving it.
Michael Jantzi, the CEO of Sustainalytics, in real life.
Q: Why did you start Sustainalytics?
I entered this space because I believe if we’re going to change corporate behaviour, we have to do it with capital. Capital is a powerful motivator or dissuader. Being able to direct it is what will help us shift to a lower carbon environment. This is in the DNA of my work. Corporations have to be part of the solution to climate change.
Q: Is the divestment movement the right way to address climate change?
A: I am neither pro- nor anti-divestment. I am pro-outcome. That includes being pro-poverty alleviation, pro-diversity, and pro-transition to a carbon-free economy. Accordingly, I support whatever tools investors choose to use to address the risks and opportunities presented by climate change. I say bravo if investors decide to avoid directing capital to carbon-intensive companies through divestment. Divesting is an effective way for people who want to avoid oil sands or create a carbon-free portfolio. But I also support efforts to lower a portfolio’s carbon intensity through the integration of sustainability factors into the investment process and shareholder engagement strategies.
Genus Capital – who was our third-ever client back in 1993 – reflects this diversity of approaches. Genus was one of the first investment firms to offer a divestment option and it has always continued to innovate in how best to integrate sustainability into their portfolios to combine positive impact and shareholder value.
Q: Is the industry moving towards or away from values-based investing?
A: The concept of values-driven investing has been around for decades, but under different names. It might just be a reflection of how old I am, of course. I started out in the socially responsible investing space in 1990, back when it used to be called ethical investing. Back then, ethics and values were the driving force. People still wanted to get a good return, but it was about generating bottom line performance in a way that was aligned with a set of values that was important to them.
There was a swing in the market in the mid-2000s, at which point investors started to focus more on sustainability as a driver of shareholder value. Looking at ESG issues as part of the process to make the smartest decision is now a mainstream phenomenon. For example, institutional investors like pension plans and sovereign wealth funds are integrating sustainability principles into their investment decision making processes. Unfortunately, mainstreaming came at the cost of ostracizing values. But I reject the false dichotomy between shareholder value and values – that never made any sense to me. They’re not diametrically opposed, and it’s not a zero-sum game – they go hand-in-hand. As with most things in life, we seek equilibrium, and the pendulum is swinging back now. Both institutional and retail investors are more comfortable talking about impact as part of the investment equation. Today, it’s evolved from ‘ethical investing’ to ‘impact investing.’
Q: What’s driving that growth right now?
A: What’s interesting right now is that the growth of the market –– which has been driven by values-agnostic investors that see the financial value of ESG –– is being fueled by those same investors as they begin to focus increasingly on the economic and social impacts of their portfolios. They are embracing the idea that providing capital for the transition to a low-carbon economy is the epitome of “Doing good is good for business.” And in turn retail investors are raising their voices to demand cleaner portfolios and the opportunity to direct their money towards firms that are focused on finding the solutions to the myriad sustainability challenges we face today.
Have a burning question for Michael that we didn’t cover? Leave us a comment below.