Page 23 - Taking Stock 22 Summer 2019

Summer 2019 Taking Stock Making a positive impact The traditional approach to ESG investing has been based on excluding from the investable universe those companies that fail a screening process. In practice, these are companies whose activities are likely to cause harm to society or the environment, calling into question the long-term sustainability of their business model and earnings stream. Such businesses might rely on the sale of tobacco or weaponry, pollute the environment, make an unacceptable contribution to climate change, or carelessly manage their supply chain at the cost of vulnerable workers. This approach represents progress on traditional standard investing techniques, but investor thinking in this area has since progressed further. Many investors increasingly expect their investments to make a positive impact on the wider world alongside a nancial return. Impact investing might include equity investment in a developer of green energy technology, private equity investment in educational services, green bonds that nance wind farms, or real estate investments that are both low energy and serve a social purpose such as aged care or social housing. Real estate managers can go further and make a positive impact by investing in solar power. Shopping centres that use most of their energy during the day when it is typically sunny represent a solar power opportunity. However, industrial premises, such as warehouses, tend to have more modest energy requirements and currently have limited solar generation potential. This is because exporting excess solar power into the grid is not remunerated at the same rate as drawing it down from the grid. Hence, solar systems are generally sized to meet the energy demand of the building, rather than the maximum generation potential. !BACK TO FEATURES 23 2 3