Photo by Sheherazade Photography

“Technologies like renewables have their limits,” says Markus Muller. “The real potential for a sustainable global economy lies in using the wonders of nature to help rectify the planet.”

As has been previously discussed, a fundamental issue underpinning climate change is that the current economic system does not recognise nature as capital. We use and degrade nature freely. But we can go further than that, and say that putting nature at centre stage and appreciating the ecosystem services that it can deliver, would significantly help us counter climate change.

Markus Müller

It is easy to believe that technology, correctly implemented, will be enough to combat climate change. And it is true that technological transformation, moving away from fossil fuel based production chains towards more electric and alternative energy based production chains, will support the reduction in CO2 emissions and in mitigating the climate change problem. But, if we wanted to electrify the entire world so that everything is based on renewable energy, it would require a vast amount of commodities that we currently do not have. Current estimates suggest we would need 500% of the commodities we already use today. And the extraction of these commodities will harm nature as well. So, technology has natural limits in its ability of adapting to a future counteracting climate change.

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We need the help of nature.

Nature based solutions (NBS) are one of the most important ingredients here. As defined by the IUCN, they leverage nature and the power of healthy ecosystems, to protect people, optimise infrastructure and safeguard a stable and biodiverse future.

Their potential is massive. One exciting aspect is that they can include local communities, especially in the global south, which are currently excluded from global developments. NBS produce societal benefits in a fair and equitable way, in a manner which promotes transparency and broad participation. They also maintain biological and cultural diversity, as well as the ability of ecosystems to evolve over time.

Photo by Francesco Ungaro

The IUCN have estimated that NBS have the potential to reduce roughly 10-18 gigatonnes of CO2 emissions each year (by 2050). This would be a major contribution to reducing CO2 emissions. And NBS also mean the reinvigoration of nature, which will further increase the climate mitigation benefit, including in such crucial areas as the resilience of the coastline.

One discussion in the global market is how to use NBS for carbon credit trading. NBS are one of the carbon sinks and these credits can be traded by companies not just to offset their C02 emissions, but also to steer those companies, via these carbon credit markets, to reduce their greenhouse gas emissions.

And there are other potential benefits. In the ocean, if we put some areas under protection because of NBS, the fish stock will be very likely to recover. The fish stock will swim around, outside the protected area, which could benefit sustainable fisheries also outside such areas; scientists having found that this led to an increase in output. So NBS have multiple potential benefits to the entire planet.

Read more: Markus Müller On Natural Capital

As another example, a healthy coral reef absorbs 97% of the energy of a wave. And this speaks to the further economic potential of NBS. New jobs, for example. We have forest rangers, so why not have coral rangers or gardeners?

Photo by Vishwasa Navada

In fact, they already have coral gardeners in Tahiti, where they are a source of labour on this breakwater. Creating a coral reef produces environmental and biodiversity benefits, creates labour, and can generate a profit.

There is however, a challenge: complacency and the rebound effect. We know this from countries where recycling has become a tool for reducing plastic waste, but the high recycling ability of a country (Germany is a good example) leads to more plastic production. Therefore believing that NBS will do the trick and lead to absorption should not lead us to think that we can emit further CO2. NBS will only ever work while we are reducing CO2 emissions at the same time. The priority is to reduce CO2 emissions while using the ability of NBS for absorbing CO2 as a mitigation strategy.

Markus Müller is Global Head of the Chief Investment Office at Deutsche Bank’s International Private Bank

Find out more: deutschewealth.com/esg

Jennifer Anderson, Co-Head of Sustainable Investment & ESG at Lazard Asset Management, speaks to LUX Contributing Editor, Samantha Welsh, about the history of her career, the changes in the ESG investment landscape over that time, and offers an insight into why she thinks the industry is at an important inflection point

LUX: What inspired you to pursue a career in sustainable investing?
Jennifer Anderson: My grandmother was a visionary, in my eyes. She was an early campaigner with Greenpeace in the 70s and 80s and often spoke about her work. I remember her talking about her involvement with the Chernobyl Children’s Project, activities to protect the ozone layer and cleaning up local beaches. That certainly sparked my passion for environmental issues. As I continued my education, I sought study options that helped me explore the intersection between business and the environment. At university, I studied environmental economics and development economics. The lightbulb moment was during my work experience with an asset manager, where I first learnt about socially responsible investing (SRI). I remember thinking “Wow, you can have a career in investment focused on understanding how social and environmental issues relate to that”.

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My career continued in asset management in the then ‘niche’ area of SRI, with focus on an ecology fund that was the first authorised green unit trust launched in the UK. I then joined an ESG Equity Research team on the sell side, authoring research on BP’s Macondo disaster. I built on this experience at an asset owner, where I spearheaded ESG and climate integration for pension funds. Since 2019 I have focused on the expansion of sustainable investment and ESG integration at Lazard Asset Management.

Jennifer Anderson, Co-Head of Sustainable Investment & ESG at Lazard Asset Management

LUX: There has been a bit of an ESG backlash recently. Is this the beginning of the end for ESG?
JA: Far from it. In some ways the public’s growing scepticism was to be expected, and so one could argue the industry needed to go through this, have healthy debate, and adjust approaches to arrive at a better place. The frequency and severity of extreme weather events is increasing, and income inequality continues to widen. The momentum to correct these imbalances is building, but to many it remains slow. So, it is easy to understand the growing ire. There is also a great deal of noise that investors must cut through in this growing space. News headlines about greenwashing create doubt, the current “one size fits all” corporate scoring approaches create confusion. Recently, the S&P 500 ESG Index dropped Tesla, while keeping Exxon. How are investors meant to make sense of all of this?

A dichotomy has also emerged following the war in Ukraine. The situation makes commitments to reduce the use of fossil fuel, challenging in the near term. Longer term, it could accelerate renewables adoption to help achieve energy independence, but it shows the road ahead could be rocky. Spikes in commodity prices tend to disproportionately affect those on lower incomes as food and fuel costs make up a larger proportion of their overall expenditure.

So, who ultimately pays for the energy transition and how will the effects be managed? These are some of the questions that the concept of a just transition seeks to address. How does the transition out of high-carbon activities into greener ones happen in a way that workers, communities, and countries are protected while also maximising the benefits of climate action? The focus on real-world outcomes is certainly growing. ESG strategies have migrated from approaches largely focused on negative screening and exclusions to those centred on ESG integration. The next stage for the relevant industry participants will be evidencing outcomes and impact, which has traditionally been easier to do in private markets. The industry needs to demonstrate value to break through the scepticism.

LUX: How important is the role of governments and international frameworks such as the United Nations COP meetings in channelling capital to more sustainable activities?
JA: A global challenge requires a globally coordinated response. It is easy to view climate summits in isolation, but having closely followed their progress over several years, I would say the fundamental shifts are clear. I attended COP26—the climate change conference in Glasgow—in November last year. It was the most widely publicised climate conference ever. The scaled-up presence from the private sector was also noticeable. The Glasgow Financial Alliance for Net Zero—comprising 450 financial institutions—have pledged an eye-catching $130 trillion in capital to fight climate change. Investors, companies, and countries are now making net-zero targets the norm. So, if we look back to where we were at COP21 in 2015—where 195 countries adopted the first-ever universal, legally binding global climate deal—it is fair to say a lot of progress has been made since, but there is still a long way to go.

LUX: Is there sufficient data to quantify and price environmental and social issues?
JA: Third party tools and data help with benchmarking or as a starting point, but they can be unreliable in isolation, backward looking, or incomplete. Add to that the fact that ESG and sustainability issues are not uniform in scope, scale, or duration across industries and geographies. Ratings agencies combine data from different sources and condense that information into a score. This is a highly subjective process. What sources of information are used and why? How is the information sourced and “cleaned”? How are information gaps bridged? The methodologies and qualitative analysis used vary significantly between ratings agencies, so the scores produced tend to have a low correlation. As an investor you look at this and wonder which is closer to the truth.

Sure, clarity from standard setters and accounting bodies will help, but this does not replace the expertise that investment professionals offer. They have a deep knowledge of how governments, regulators, companies, and industries operate. At Lazard Asset Management, our investment professionals are responsible for incorporating ESG and sustainability-related risk and opportunity assessments into their relevant analysis and are supported by in-house expertise in ESG and sustainability—including in climate science, the energy transition, stewardship, and net zero—to help them contextualise and size issues when incorporating them into their applicable financial models.

Financial materiality is dynamic. Governance and human and natural capital issues that are material today may not be material in the future. Investors need a forward-looking, active approach.

Read more: Octopus Energy Founder Greg Jackson On The Green Revolution

LUX: What role does engagement play in making sustainable investments?
JA: I believe engagement is everything. Lazard Asset Management recognises that a company’s governance policies and board structure, environmental practices, labour policies etc, can materially affect a company’s long-term financial performance and therefore a security’s valuation. The firm’s fundamental analysts work together to understand issues that follow supply chains or impact certain geographies, and this is what gives our research depth. With this depth of knowledge, the professionals on our fundamental research platform can interact with management in a meaningful way to understand how this relates to corporate strategy and achieving better real-world outcomes.

LUX: What messages do you have for investors starting on their journey on sustainable investment?
JA: Firstly, I would say sustainable investing is no longer seen to be predicated on a trade-off between enhancing returns and having a positive real-world impact. Inadequate governance practices and poor stakeholder management can undermine a company—or even a country’s—long-term prospects, and this can later become negatively priced by capital markets. Secondly, investors need to be very clear on their objectives. Are they ESG-aware and seeking to incorporate financially material ESG issues into their investments and wanting company managements to be challenged on ESG issues that are a cause for concern? Are they sustainability focused—i.e., believe the world is transitioning to a greener, fairer, healthier, and safer place –and wanting to capitalise on this as a structural theme? If so, bottom-up, fundamental strategies can identify the winners and losers from the transition to a more sustainable economy. Beyond this is impact investing, which has a much higher threshold again, and is about evidencing both intentionality and additionally. Every type of investment has different risk-reward profiles. It’s about identifying which ones align with your investment beliefs and objectives.

Find out more: lazardassetmanagement.com/sustainable-investment

Ombra Di Pantera is a new producer of Prosseco, and businessman Utsava Kasera’s latest investment

Utsava Kasera is an entrepreneur and investor with interests in luxury brands, fashion, art and tech. Most recently, his attention has turned to new Prosecco brand Ombra Di Pantera. Here, he tells us about this latest investment, finding a gap in the market and his new year ambitions

Utsava Kasera

1. How did you first come across Ombra Di Pantera?

I always wanted to be involved in the drinks industry and the stars aligned when I met the other promoters of Ombra Di Pantera over a lunch through a common connection. The opportunity looked very good and we are on an exciting journey now.

Our inspiration for ‘Ombra’ is delivered from a unique heritage and a fabled history which stretches back to the Roman wines of antiquity. In ancient times, traders who served wine in Venice’s Piazza San Marco would follow the shadow of the Campanile to cool their wine as there was no refrigeration, and the Venetian expression, ‘Ombra de Vin’, meaning ‘Wine’s Shadow’, is still used to order Prosecco in its original heartland. Another interesting fact about Prosecco is that typically a glass contains fewer calories than wine and there is a town called Prosecco nearby Venice, where the name of this bubbly comes from.

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2. What drew you to invest in the business?

The huge demand for Prosecco in the UK and lack of branding around it gives an opportunity to fill a missing gap in the market. The sales of Prosecco have overtaken champagne in the UK, which is now the second biggest market in the world after the US. Besides that, it’s a delicious Prosecco which embodies the elegance of Italian luxury and I believe it has the potential to make its mark in the sparkling wine world.

3. What sets Ombra Di Pantera’s Prosecco apart from other brands?

Ombra is traditionally crafted from a single vintage, using superior Glera grapes from our delicately cultivated Conegliano vineyard, to deliver a pure expression of the very finest Prosecco. The Prosecco is created ‘in bianco’, meaning the fermentation is without the skins creating the delicate sparkle that is captured over 60 days to produce a fine, persistent perlage. The steep hills of the vineyard provide the perfect conditions to grow  Glera grapes, which require cultivating and harvesting by hand relying on traditional methods refined over a thousand years. Ombra Di Pantera is dedicated to celebrating the traditional heritage and craftsmanship of Italian viticulture to deliver an authentic, exclusive Prosecco experience and can stand up to any high quality champagne or sparkling wine in blind tasting.

Ombra Di Pantera’s Prosecco is made from Glera grapes grown on their vineyard in Conegliano

4. How does the company fit into your wider investment portfolio?

My investments are across a wide spectrum of industries from tech to hospitality. I particularly invest in industries and projects, which I am passionate about rather than just looking at the numbers. Having said that, Ombra compliments a couple of my investments, which are in private members club, one called 1880 in Singapore and a wine bar chain in London called Vagabond.

Read more: Knight Frank’s Andrew Hay on the best emerging markets for real estate investment

5. What are your ambitions for 2020?

I would like to focus on making Ombra di Pantera bigger by aligning with more luxury partners and concentrate on strategic growth of the brand. I am also a co-founder of ‘Sidehide’, which is a tech app for hotel booking, providing a seamless experience for users and I will be involved in the launch and marketing campaign during 2020. Lastly, I would like to do some volunteering work with one of the charities I am involved with, and learn to play the piano.

6. How do you switch off?

I have a passion for whiskies and cognac. Enjoying a dram of Springbank 21 years whisky or Louis XIII cognac in company of friends relaxes me. Recently, I have started taking out time to cook and I am enjoying it at lot. Travelling is another passion and therapy of its own kind for me.

For more information visit: ombradipantera.com