Sustainable Investing: The Future of Alpha?

Published on
July 30th, 2018
Topic
Portfolio Management, Business Strategy, Sentiment
Duration
25 minutes

Sustainable Investing: The Future of Alpha?

The Expert View ·
Featuring Aniket Shah

Published on: July 30th, 2018 • Duration: 25 minutes • Topic: Portfolio Management, Business Strategy, Sentiment

Aniket Shah, the head of sustainable investing at OppenheimerFunds, explains what sustainable investing is and why it matters. He discusses the history of the investment practice, delves into the ways in which it’s being integrated today, and forecasts what its future may hold. He also addresses the investment implications of climate change more specifically. Filmed on July 23, 2018 in New York.

Comments

  • JE
    James E.
    4 August 2018 @ 19:51
    Trying to mitigate carbon emissions is quite humorous, since it is the most abundant element on the planet. Since the climate on Earth has changed for millions of years what is so different now? All climate change models exclude the influence of the sun, quite a telling omission. However the environment and sustainability are very important areas of concern and need to be researched, areas as the unsustainable grazing in Africa, rotational grazing instead of set stocking, the Amazon should be protected, a major concern that such a sink of magnificence is being decimated as politicians sit idolatry by. I can see in the not to distant future a battery that can store enough energy for a household for six months, with solar panels, free electricity for ever. Great for the pocket. Still to be able to crack the problem of producing sustainable energy for ever would be nice, to keep us warm through the next cold period when the sun goes quite for a while instead of pumping out great volumes of solar wind as it is foist present. Maybe we get hit by the asteroid that has earth’s name on it. Just my thoughts. The elites have the narrative at present, they have the crowds’ ear, it won’t last for ever.
    • CG
      Christine G.
      12 August 2018 @ 06:50
      You asked what has changed in the context of a forever-changing environment. Climate change has been conclusively demonstrated in terms of both the absolute changes and the rate of change. Environmental climate markers tend to stay in a typical band and patterns of change tend to evolve slowly. When the rate of change of any system that is in balance, changes, it is due to exogenous factors; in the case of climate change the exogenous factor is industrial production which has increased the level of carbon dioxide and other heat trapping gases, which in turn has led to the warming of the planet. Solar winds and solar flares exist but they are not correlated with the increases of heat trapping gases or the world's temperature that we are now seeing.
  • DC
    D C.
    3 August 2018 @ 18:09
    Thanks to crowd wisdom comments and the free market of up and down votes for saving me 24 minutes I would have never gotten back!
    • CG
      Christine G.
      12 August 2018 @ 06:52
      If there were any facts that you did not have, or if you were unaware of his logic, then his talk was just a good review. If you are having any difficulty with his conclusions, listen to it again. You are missing something.
  • DP
    David P.
    2 August 2018 @ 10:31
    Sales pitch, too obvious unfortunately. That subject deserve a better coverage, maybe as an interview with someone on the opposite side to confront the views. Getting someone with a real science background would also help
    • CG
      Christine G.
      12 August 2018 @ 06:55
      His science was fine. If any of it was new to you, you should do your homework; possible sources include the National Academy of Sciences or even Wikipedia.
  • PU
    Peter U.
    2 August 2018 @ 09:57
    never seen a presenter on RV get a ratio of thumbs down to thumbs up this bad, EVER
    • CG
      Christine G.
      12 August 2018 @ 06:57
      Which is a sad commentary on this audience and perhaps the entire business community.
  • LT
    Lucas T.
    1 August 2018 @ 16:56
    I made it through about ten minutes before tuning out. You might believe his good intentions if it were not below 13 layers of gobbledygook.
  • JC
    JAMES C.
    1 August 2018 @ 15:11
    I think this is largely nonsense based on superstitions created by carefully structured narratives laid on the people via a unscrupulous mass media. Much of the real social and economic issues being discussed has been baked in the cake of a vast number of companies for many years now. It seems bogeymen are being created to justify nations taking a subordinate relationship with the UN, generally for purpose of control and taxation of masses via unelected UN body and its policies (I have to raise taxes because the UN said so)? Its shameful that the system that has created the vast wealth we have (at least in developed nations) is not being relied upon to continue its work. It seems academia cannot or will not understand and filter the real from the imaginary and thereby train the young to continue the wealth creation we historically have. Anyone can achieve a goal if they have direct control of all relevant factors and "drive it home" but it is rare to have a system that is distributed and can achieve multiple and varying goals largely aligned with participants needs. Although not perfect this system is what we owe our "alpha" to in terms of national wealth (and what allows us to share with others). There is no guarantee of a societally beneficial goal if centrally created from averages, this drift towards some sort of neo-Marxism under UN rule is a real concern for the future.
    • JL
      Jack L.
      1 August 2018 @ 21:16
      Well said.
    • BP
      Bakulesh P.
      7 August 2018 @ 17:39
      Right to the point. These are all narratives to squeeze our minds and money away from us and to them. So sad that the whole world is being used by the elite and one day there will be major retaliation.
    • CG
      Christine G.
      16 August 2018 @ 00:27
      What are you talking about? Do you think climate change science is a narrative? Do you think long term planning is just a narrative? What about quantum mechanics, is that just a narrative also? How do you think this was related to the UN?
  • SD
    Sebastien D.
    1 August 2018 @ 12:23
    The RV audience is unforgiving! It makes me feels that the guests are like gladiators entering the arena... and may not leave it alive... Expected much worst from the comments
    • VC
      Vince C.
      1 August 2018 @ 13:24
      Interesting analogy! I've assumed the comments and likes section to be opportunity for direct feedback and review for Real Vision in assessing and iterating on the content they produce, particularly in two areas from this subscriber's POV: 1) Continued quality content, 2) Content that appeals to we, the subscribers. Also like to think most Real Vision subscribers are independent thinkers by nature and so the ratings and comments are not wholly (but undoubtedly to a degree, agree) influenced by group think.
  • VC
    Vince C.
    1 August 2018 @ 07:22
    The definition of smoke and mirrors. Poor quality.
  • WM
    William M.
    31 July 2018 @ 21:35
    Whatever your political view and/or awareness of ecological and social issues, Mr Shah gave a very clear, articulate overview of what the sustainable investing movement is all about. Even if you don't buy into it, it's a movement that seems to be getting a lot of traction with many investors especially younger ones. I appreciate that RV presents videos like this to round out our awareness and maybe open our minds... It would be interesting to have a follow-up with Mr. Shah discussing individual investments. As with the responsible investing movement that preceded this ESG movement, there is certainly much to debate when it comes down to specific investments, but that doesn't mean it's not worth considering when making one's investment decision. Ethics and politics etc. are always going to be very controversial and sometimes quite uncomfortable to "cuss and discuss", but I personally think we need to do more of this in this country if only to try and better understand each other and possibly cooperate with one another better. Or maybe we should all just get out our guns and duke it out in a big civil war re-enactment!
    • CY
      CHIHLUN Y.
      1 August 2018 @ 04:34
      Hello William, agree with what you outlined, except perhaps the proposal about that big civil war (unless you're vested in gun stocks?). @RV team and @Milton, perhaps we could ask Mr Shah to come back to talk about individual stocks? There must be many RV subscribers that would like to invest in companies and ventures, and at the same time are thinking "I wish I know where to put my money where there are both potential for wealth growth AS WELL AS making the world better for myself, those around me, and the generations to come."
    • AJ
      Aaron J.
      12 August 2018 @ 17:47
      Well said William M.
  • PW
    Paul W.
    31 July 2018 @ 18:42
    I have been a student of the African economies for several decades and remember what was probably the first iteration of "ESG" investing when many companies caved to the demands of a noisy minority to divest from all operations in South Africa. I believe the divestment had almost nothing to do with the end of apartheid and once apartheid was nominally ended (not really - it is actually worse today with opposite polarity), it left the country without the type of industrial base that could have helped it prosper. Maybe its just that I'm an old dog unreceptive to new tricks, but I don't see much positive coming out of the new ESG movement either. At the end of the day, I just don't trust a politically-driven (Mr. Shah's assertion notwithstanding) organization to create a list that reflects my values. I am perfectly capable of evaluating a company as to whether their behavior is something I would embrace within my own company - an ESG portfolio, by definition, represents a set of activist values that I might or might not agree with so I am just not willing to delegate my thinking.
  • GS
    Gordon S.
    31 July 2018 @ 11:58
    I fear that most of the people who are raging about climate change in the comments here are missing the broader message Mr Shah is trying to convey. One may or may not “believe” in CO2 emissions affecting global temperatures, fair enough, but does it really make sense to completely ignore the planet we live on? We are witnessing the collapse of ecosystems all around the world, in particular large drops in the biomass of insects on land and the mass dying of corral reefs in the ocean, the foundations of life. I am personally deeply convinced that we should take these environmental factors into account. Unfortunately, most of the ESG products are in my opinion frauds (just check out their various holdings), but that doesn’t make the issue less acute.
    • GS
      Gordon S.
      31 July 2018 @ 12:03
      The RV interview with Chris Martenson: “Expand your capital for the next crisis” may be a better choice of ones time on this topic (with a better 622/31 vote ratio). https://www.realvision.com/rv/television/videos/807967052f1847a4849e2b539c160f35
    • TB
      Tim B.
      31 July 2018 @ 12:33
      Oh, Gordon, that video you posted is great. Thanks. Chris does a great job of connecting the dots between ecology and economics.
  • CY
    CHIHLUN Y.
    31 July 2018 @ 09:27
    Mr Shah is well spoken, and I appreciate the concepts on sustainability and responsibility he outlines. However there is little a typical viewer can act on short of going to buy a fund he manages, or just scratch one's head a bit. Of course one could go find the prospectus of his funds and look at the top holdings, but that doesn't add insight or value beyond what a person with an internet connection can consider already. However I doubt that Mr Shah couldn't have provided more insights. Perhaps it's just a matter of the interviewer not having enough time to ask the deeper questions?
  • JB
    Jason B.
    31 July 2018 @ 05:12
    Will he be managing the Clinton Foundation investment portfolio? How about Al Gore's $$?
  • SF
    Stephen F.
    31 July 2018 @ 04:32
    Globohomogayplex
  • GH
    Gregory H.
    31 July 2018 @ 03:51
    Don't fret... Every once in awhile it's good to have videos like this (this belongs on CNBC or Bloomberg), so you can be reminded how great many of the others are on RealVision.
  • DS
    David S.
    31 July 2018 @ 01:59
    This is always going to be a hard sell to independent traders. One point that Mr. Shah tried to make was that it may be more profitable to invest in green. He needed to show a concrete example of a trade now to interest the RVTV traders. None were shown as I remember. In the past the only way to make green profitable was for governments, (all of us) to subsidize it or pass laws like bottle deposits. At one point no one wanted National Parks until Teddy Roosevelt started the forest service. DLS
  • FC
    Fractal C.
    30 July 2018 @ 22:38
    I am not going to watch this but this has to be more thumbs down than up video for sure!
  • JL
    Jack L.
    30 July 2018 @ 18:11
    Peter Thiel compares the University/'Sustainability'/'Inclusion'-Industrial Complex as being the modern equivalent to the 15th Century Catholic Church selling indulgences. This was like going to mass :) Very well-spoken seemingly good natured gentleman though and I appreciate RV giving us all sorts of perspectives!
    • FC
      Fractal C.
      30 July 2018 @ 22:40
      Is that a real Peter Thiel quote? If yes, can u please share the link?
    • JL
      Jack L.
      1 August 2018 @ 21:20
      Hi Fractal C.- I don't see a way to reply to your reply specifically so am just replying to my own in hope you will see it :) I don't have a specific link but that is one of Thiel's most common 'witticisms' and he has referenced some variant on it in dozens of interviews. If you go to Youtube and search 'Peter Thiel on college' pretty much any long form interview of his should include him riffing on it. I think it is an excellent analogy and often cite it when these topics arise :)
  • Sv
    Sid v.
    30 July 2018 @ 18:04
    carnival barker. Still, there is some education in seeing what is being pumped by the big dogs.
  • IF
    Ian F.
    30 July 2018 @ 17:59
    Just marketing for Oppenheimer's products... I went to a CFA event about ESG and they had someone from Oppenheimer pitching their ESG mutual funds. They run less than one $billion in this strategy. If they really cared they would put their money where their mouth is. On another note the New York City Pension Fund put a big chunk of their assets into an ESG ETF, you know how this story ends....
    • SF
      Stephen F.
      31 July 2018 @ 04:34
      AUM speaks truths
  • JB
    Jim B.
    30 July 2018 @ 17:54
    It's interesting to hear the views of a true believer on the climate change issue. Climate science is not only spectacularly wrong in its predictions, it is corrupt as a practice because of the politics behind it (which Shah claims are now irrelevant). Does he really think carbon dioxide is the main cause of "climate change," when the long-term geological data completely contradicts this assertion? CO2 probably has as much positive effect (fertilization) on the environment as negative (if any) effects. I wish there were a way to "short" climate hysteria, other than being short Tesla. The best way to insure that people (actual human beings) are protected against the potentially negative effects of climate change is to insure a reliable, cheap, abundant source of industrial energy - and this will inevitably include fossil fuels for many decades to come.
    • sm
      stephane m.
      30 July 2018 @ 23:37
      If you want to short this climate change non sense, buy RJA-N... The world will get colder not warmer and agg. products will go up!!
  • CK
    Chris K.
    30 July 2018 @ 16:21
    Unfortunately, RealVision seems to become increasingly intolerant to opinions that differ from the RV mainstream view on any major issue - be it financial markets, politics or science. While I’m personally critical of social investing, I appreciate Mr. Shah’s perspective. Listening to things that I disagree with is difficult (and sometimes straight out painful), but it helps me better understand other players in the market and become a more critical thinker. Nothing helps me more to refine my investing framework and I thus embrace the RV contribution that go against my personal beliefs.
    • MK
      Michael K.
      30 July 2018 @ 19:39
      well put
    • JW
      Joe W.
      31 July 2018 @ 06:15
      I believe people bag on this guy is because he present the information without any framework or facts. He is merely throwing out marketing terms throughout the entire video. Had he bring up some specific facts or arguments on why ESG is an investment opportunity I think people may take him a bit more seriously.
    • TB
      Tim B.
      31 July 2018 @ 12:37
      Indeed, and sometimes we slowly realize our tightly held beliefs are just plain wrong. Good to be challenged.
  • SK
    Sung K.
    30 July 2018 @ 16:20
    Complete waste of 25mins
  • CM
    C M.
    30 July 2018 @ 15:53
    Comments in this video about looking down the road for 30 years reminds me of Buffett's desert island game. If you were stranded on a desert island for ten years in what stock would you invest? Buffett's trick was to find the company least subject to the corroding forces of competition and time. In this video, the theme is based on sustainability. The issue I have with a 30 year sustainability timeline is that a number of themes do take a long time to play out and may not make good investments today. One still needs to balance positive cash flow and multiples with the future, unpredictable size of "sustainability" end markets.
  • JM
    Jamie M.
    30 July 2018 @ 15:35
    somebody owes me 25 min. of my life back. Hopefully this was the "consumer" facing description of his job and there is a lot more to it.
  • BH
    Ben H.
    30 July 2018 @ 14:40
    Thanks Aniket, Very interesting topic IMO and we are deff seeing a shift towards this sort of investing .. You only have to look at China and what they are doing in regards to environmental initiatives, banning polluting companies and their big investment in electric vehicles including buses where you have whole city fleets now electric one of them has 16,000 buses all electric this is just in one city.. there is a massive push to go electric in China and also around the world this is now gathering momentum- its a great trend to be invested in over the coming decade and beyond IMO. In reply to Yuriy B's comment below as far as opportunities to invest have a look around this theme check out all the raw materials needed for this EV world- Lithium, cobalt, copper, nickel both producers and explorers.. Yuriy and anyone who is interested another company that comes to mind and fits this theme perfectly has an easy to install IOTproduct which is helping companies/buildings improve their environmental "footprint" and save money by measuring the utility usage and taking that data and presenting it as actionalble insites ( think fit bit for buildings) it shows how much water, gas, electricty, solar etc a building uses, all of this information is can be displayed on a screen in almost real time and allows building occupants/ building managers to be come aware of the usage and make changes. Studies have shown by making occupants aware it can save up to 6% off monthly electricy bill, they are also just releasing a service where a building can buy gold standard carbon offsett credits to offsett their monthy footprint and become carbon neutral- IMO this is huge.. The company is called Buddy Platform ltd and is listed on the ASX, code BUD. Disclamer i hold BUD and none of the above is investment advice as always DYOR lol..
    • YB
      Yuriy B.
      30 July 2018 @ 14:43
      Thanks Ben!
    • PW
      Paul W.
      31 July 2018 @ 18:28
      Interesting post but do you have any concern that the entire carbon credit system doesn't do quite what it purports to do? Whether the quote above is really from Peter Thiel, the carbon credit system *does* seem an awful lot like the sale of religious indulgences of centuries past and I have yet to see any tangible benefits. I get the theory but in practice it just seems to allow people to synthesize a false "carbon-neutral" position and seems like a tool used mostly for virtue signalling by those whose lives are visibly at odds with a carbon reduction strategy.
    • BH
      Ben H.
      2 August 2018 @ 05:34
      Hi Paul.W, I dont know enough about the carbon credit system as a whole to be able to comment I do know Buddy are only offering/supporting the GOLD Standard Carbon Credits. The Below is off their website.. "Buddy only supports Gold Standard offset projects–a standard and certification body that stands for the best that can be achieved in sustainability and development projects. Whether you choose to support energy efficiency, safe water access, or renewable energy projects, your carbon offsets are guaranteed to support the global economy and sustainable development around the world.' you can actually see the projects that they are going to be supporting.. Hope it helps you with your research..
  • GM
    Greg M.
    30 July 2018 @ 14:34
    Just to add some color on the Paris Climate Agreement that this Ivy League weenie kept droning on about in the video. There is no enforcement mechanism - the agreement is a paper tiger and useless. If Oppenheimer truly cared about the environment then stop funding the military industrial complex (divest from Lockheed et al.). The USA military is the 7th or 8th largest user of fossil fuels, not to mention every former base becomes a superfund site. Of course you think Climate change is a threat - that's who is signing your checks. You remind me of the SVP at HSBC who went around the bank spreading non-sense of climate change. I remember her starting her presentation with the line "the science is settled." (like science is ever settled) The lady pulled 475K a year in salary to boot. Global warming ERRRRR Climate change is a big-con and it is Monday morning and I don't have a tolerance for bullshit. Follow the money.
    • JW
      Joe W.
      30 July 2018 @ 15:42
      I was going to skip this video because had a gut feeling its going to be a PR type of presentation (Any "sustainable investing" from a big bank is 99.99% marketing and keeping the bank in good grace with the younger generation. After reading your comments I am going to watch it to entertain myself.
    • DC
      Dan C.
      30 August 2018 @ 21:14
      Guess you are a fossil fuel lobbyist. Read Jeremy Grantham’s excellent Aug 2018 Letter.
  • V!
    Volatimothy !.
    30 July 2018 @ 14:18
    Is it more sustainable to mine cobalt and lithium than coal and uranium? Nobody talks about factory farming and what they do with all that concentrated animal waste. Once again I think we are treating the symptoms rather than the problem (over consumption). “Our great error is that we suppose mankind to be more honest than it is.” Alexander Hamilton
  • MM
    Mike M.
    30 July 2018 @ 12:27
    Long term investing is chum for the HFT and the fast money boyz. Knowing what I know today I would never trade an equity or bond, every dollar saved would be invested in precious metals. If owning gold works for the Central Banks it will work well for this trader.
  • PU
    Peter U.
    30 July 2018 @ 12:07
    horrible
  • YB
    Yuriy B.
    30 July 2018 @ 11:59
    Ankit, thank you for this! As a physician, a novice investor, and a shamelessly apolitical person, I love this. Would love to see a follow-up interview of specific equity opportunities in this space.
  • Nv
    Nick v.
    30 July 2018 @ 09:42
    Hi Aniket Interesting, thanks. I would highlight the success ESG has had in avoiding accounting fraud companies Have you excluded Facebook on ESG grounds from your universe as yet? For destroying democracy, spreading fake news and running a control structure at the expense of shareholders Thanks