Former US Vice President Al Gore spoke to the choir Wednesday, receiving loud applause as he told the Principles of Responsible Investing annual conference that investing to combat climate change is part of their fiduciary role.
Gore, speaking to institutional investors at the PRI conference in San Francisco, did not cite any specific economic papers but said that it was now clear from economic research and real-time performance that integrating environmental, social, and governance (ESG) factors into investing is in line with fiduciary duty and best practices.
“The idea that the environment and the economy are in conflict is false,” Gore said. “Decarbonizing goes hand-in-hand with improved economic performance.”
Gore, one of several dozen speakers and panelists at the three-day conference that runs through Friday, has personal investment experience to back his view that ESG investing leads to better investment returns.
He is co-founder of Generation Investment Management, the 14-year-old firm in London that specializes in equity investing with an ESG focus. Generation has around $18.5 billion in assets under management in three equity strategies, and institutional investment consultants have generally lauded the firm for its strong investment returns over the years. Last year, Generation won the CIO Industry Innovation Award for ESG.
While there is still active debate over whether ESG investing leads to better results, Gore’s firm has been able to leap to the top of the ESG investing world. Gore has also produced two documentaries on climate change, adding to his cult-like status in the world of ESG investing.
Gore, who ran unsuccessfully for the US presidency in 2000, warned the 1,200 attendees they could damage the economy and civilization if they did not invest with an ESG focus.
He said the violent storms set to hit different world regions this week—in Hawaii, the southeastern US, and southeast China—are “no coincidence.”
“While oceans are out of sight and mind, they are a key driving force in altering the climate on which we depend,” he said.
Gore said climate change is “the biggest investment opportunity in the history of the world.” He cited as an example the area of energy renewables. Gore said that new jobs are being created in the renewable energy sector faster than in traditional sectors. He noted that there are five times the number of jobs in solar installation than in the coal industry.
Gore, who sits on the board of tech giant Apple, cited the April announcement by the company that it was being powered by 100% renewable energy globally as an example of forward-thinking policies.
The ESG investing advocate said despite President Trump’s decision to withdraw the US from the Paris climate accord, the reality could turn out differently. He said that is because the first time the US could break away from the pact is the day after 2020 Presidential election. He said within 30 days of an election of a new president, America could rejoin the global climate agreement.
“The missing ingredient is political will, and political will is, itself, a renewable resource,” he said.
Gore commended California officials for recent pledges that the state will derive all energy from renewable sources by 2045 and cited Europe as a positive example, noting that the European Commission is clarifying institutional investors’ responsibilities in efforts to strength ESG investing.
He also brought up fossil fuels. While Gore did not comment on whether investors should divest from oil companies, he made a comparison to the great financial crisis. He compared investors and companies exposed to fossil fuels, that Gore says won’t ever be extracted because of the need to limit global warming, to stranded assets during the subprime crisis.
He said back in 2008, bankers sold mortgages to people who couldn’t afford to pay them, and then mitigated the risk by attaching “phony insurance” and sold the mortgages on into the market.
“If fossil fuels can’t be put to use, at some point investors will recognize, as they did with subprime, that they are worthless,” he said.