Written by: Isabel Nuesse
In the system that we’re currently living in, money reigns in every aspect of our lives. Wherever money flows in our economy will dictate the priorities of our culture. If this is the case, what can we do in the short-term to influence where money is flowing and, therefore, influence the priorities of our time?
In October 2021, Jags Walia, a portfolio manager and responsible investor since 2008, gave a WEAll Talk “From Nudge to Push – Money, Power and CO2” where he shared his own experience of influencing big companies to reduce their CO2 emissions as a smart investment decision.
He gave our audience his take on how to do this, and assurance that he’s not alone working on these bold objectives.
As an investor, Jags told us he has two priorities:
- Make money for his clients;
- Consider the environmental implications of those decisions, to reduce harm and the amount of CO2 emitted into the atmosphere.
There are a number of strategies to go about meeting these goals, and, rather than shying away from today’s big polluters as potential clients, Jags operates on the notion that, by choosing to work with a dirty company, he can have a bigger impact by directly influencing their decision making. You can read his Investment Guide here.
“I find the companies that are not the saints today – and try to change their behavior and rehabilitate them.”
He shared a story of a client he worked with back in 2019. The company had proposed to build two brand new coal power plants. Of course, he was adamantly against this decision. But rather than coming out and saying his opinion, he needed to show them that making such a choice was bad business. Why? Well, the average lifespan of a coal power plant is 48 years, and he was predicting that, in 48 years, coal will not be the primary energy resource that we use and, therefore, the return on their investment wouldn’t be realized. In the end, after 8 long months of back and forth, the company decided that they wouldn’t go ahead with the power plants and not only that, but they vowed never to build another coal fired power plant again.
This was a huge win for Jags and his team, as the outcome of their work turned out to be a long-term company-wide divestment from coal, rather than something restrained to one single project within the company.
How does Jags do it? He shared his 3 main strategies for how to engage with companies effectively.
- Understand the complexity of the situation that the company is in. Really put yourself in the shoes of these businesses. Who are their stakeholders? Who are the beholden to? What steers their decision making?
- Find the right question(s) to ask. When engaging with any company, find out what is possible for them within their context. Don’t suggest something outrageous for them to achieve without first understanding what is reasonable.
- Evaluate what each company says they’re doing vs. what they are actually doing. Many companies will boast about their sustainability achievements, but these can often be overembellished. Do your due diligence to better understand what kinds of commitments the company is actually making.
One of the participantsasked Jags about the Key Performance Indicators he looks at when evaluating whether a company is ‘clean’ or ‘dirty’.
He said that he looks at three things,
In other words, are the companies willing to make a change? Is it possible and are they able to make it? And, can they get paid to commit to making significant changes? Still working within the current framework, Jags understands that in order for companies to decarbonize, they still have to meet their financial obligations and therefore be paid to do it.
There is always a balance between uprooting what exists, and improving the status quo. This talk with Jags showed a clear example of how to improve the current situation within the existing boundaries or our system.
If you missed the talk or want to engage further with this topic, you can watch the full talk recording on our YouTube channel:https://www.youtube.com/watch?v=bgCljvMqzKY