Investments into Energy and Resource Efficiency with a Measurable Impact
In November, we published our research paper on this topic and presented it to an audience of specialists. In the first part of the paper Dr. Andreas Walther, co-founder of Carnot and Chief Impact Officer, deals with the fundamental possibilities of incorporating sustainability and impact requirements in the investment process. In the second part, he explains how we implement impact investing at Carnot. The great interest in the research paper and presentation is an expression of the increasing importance of this investment philosophy.
Impact or Financial Return?
A rethinking has taken place in recent years in the financial world. More and more people are convinced that sustainability criteria and impact requirements do not compromise financial returns. Because of our focus on energy efficiency, Carnot has been investing with impact for more than 10 years. We have been able to outperform the overall market in the long term, after deduction of all costs. By using factor analysis and focusing on energy efficiency, we identify companies with structural growth opportunities. By analyzing a company’s sustainability criteria (ESG) we identify risks such as those in the area of corporate governance.
Impact Measurement as a Challenge:
The concrete implementation and measurement of impact is of great interest to many investors. Georg Fischer presented at our event about which market opportunities are offered when developing resource-saving technologies. The company’s representatives showed how various products from the Piping Systems division reduce water consumption and thus support the Sustainable Development Goal "Clean Water". Qualitatively, impact and sustainability are now well documented in our process, but the quantitative dimension is still insufficient. Companies like Georg Fischer are working to better represent the savings and economic benefits of products. At Carnot, we created a 'heat map' for the time being through which we judge to what extent the various goals are achieved. The quantification of resource consumption reduction across the entire portfolio will follow in a next step - as soon as the necessary basic information is made available by the portfolio companies.
Did you know: As per 1st of January 2020, the sulfur oxide limit on all oceans will be reduced from 3.50% to 0.50%. Around 70,000 ships are affected.
This is an excerpt from Carnot Capital's commentary published on the 4th of December 2018, of which the full version can be accessed here.
The research paper on impact investing in public equities is available in English and German.