glass half full post

Glass half full despite the world burning

Think about investing for the world you want, not necessarily the one we have, writes John Berry.

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Each of the earth’s poles, both north and south, recently hit temperatures that shocked researchers. We’re not just talking about it being marginally warmer, we’re talking about hitting 10C, 20C or even 30C higher than expected.

Meanwhile, the conflict in Ukraine brings the world closer to using nuclear weapons than at any time since the Cold War ended. One assessment put the likelihood of nukes being used at 10 per cent, which, while clearly impossible to measure, recognises the risk is real, not fanciful.

As an investor, and as someone who wants to invest with an ethical lens, I believe we need to be conscious of how we approach these issues and how it impacts our decision-making. Your response as an investor can be shaped by whether you’re wired as an optimist or a pessimist.

This may mean your response is “hope” or “doom” for our future. This may mean you unconsciously seek news stories reinforcing how climate change will send civilisation into disarray, or at the other extreme you unconsciously seek out news stories of breakthroughs in “green steel”, hydrogen cars or carbon capture.

If investors are more pessimistic than optimistic, then we’ll see more effort and energy reviewing transition plans of companies for a lower-carbon world. If companies cannot transition they will fail in the medium to long term, so are bad investments now. This is absolutely necessary as an investor but is also a defensive approach.

If investors are more optimistic than pessimistic, then they’ll likely embrace small allocations to investment opportunities delivering potential solutions to the world’s big problems. Like the pessimist, they will want to know about the transition plans of companies shifting to a lower carbon world, but they will see this shift as an opportunity rather than purely a defensive move.

Bombarded with endless bad news and reports on the catastrophic climate crisis, pessimism is an understandable response. When markets fall as global tensions ratchet up, it’s easy to become overwhelmed.

One response is pursuing what is best described as rational optimism. This requires us to make a realistic assessment of the present moment while still believing that by putting one foot in front of the other, we can change the future for the better.

Ethical investing is one such step. Taking 10 minutes to check that your KiwiSaver isn’t helping to fund the climate crisis (and ideally, actively trying to help prevent it) is something a rational optimist would do.

I suggest we ask ourselves what kind of world we want to live in. And what kind of person we want to be within it. I’m assuming most of us wouldn’t choose to be scared, tired, frustrated and resigned to hopelessness. The first step on our way to being brave, energised and hopeful, is remembering that small steps ultimately get people over mountains.

And my favourite tip for being more optimistic? Think about investing for the world you want, not necessarily the one we have.

- John Berry is co-founder and chief executive of ethical fund manager and KiwiSaver provider Pathfinder Asset Management.

This commentary is general information only – it’s always a good idea to seek professional financial advice for your personal circumstances.

Originally published in Stuff 6/4/2022

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