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Marko Oksanen is CEO of Coventures and an experienced product leader. Marko has been involved in building digital products and ventures his whole career. As co-founder, product manager or venture designer he has been hands-on building 20+ fast growing digital ventures in Helsinki & Berlin.
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Climate worries are spurring younger investors to rethink their portfolios
Last year was marked by a series of unprecedented weather patterns taking place across the world, causing irreversible damage to natural ecosystems and costing billions in damage. For decades, experts have exclaimed that accelerated human activity is directly impacting atmospheric temperatures, leading to more extreme weather outbreaks now becoming a more frequent occurrence.
Climate change, or more importantly, rising surface temperature isn’t a myth anymore. According to the World Meteorological Organization, last year was the hottest year on record, with the global mean near-surface temperature being around 1.40 degrees Celsius higher than before the industrial revolution. Based on MTO’s data, 2023 is expected to be the hottest year in over 174 years.
Warmer, dryer, and longer summer seasons aren’t the only thing humans are now faced with. Heavy rainfall in East Africa, more specifically in Somalia, Ethiopia, and Kenya during October and November caused devastating flooding. In August last year, Canada experienced their worst wildfire on record, burning approximately 13.4 million hectares of land, and sending thick clouds of smoke across parts of North America.
More than climate: an ESG investing mindset
While environmental concerns may perhaps sit at the back of the mind for some older and more seasoned investors, younger generations are embracing the idea of creating more visible change through their investing strategies. Some cohorts of young investors, particularly Millennials (born 1982 to 1996) are perhaps playing the most significant role when it comes to ESG – environmental, social, and governance-focused investing.
In one report by Morningstar, data showed that Millennial investors poured a robust $69.2 billion into sustainable funds in 2021, and more than $51.1 billion in the year before. This is an overall significant improvement compared to the $5 billion invested in ESG-focused funds back in 2015. Other research by Morgan Stanely found that 90% of Millennials surveyed were interested in pursuing sustainable investments, compared to more traditional strategies.
However, Millennials aren’t the only ones looking to change their investment habits for the betterment of the planet and environment. In fact, Generation Z (born between 1997 to 2012) are also among those now focusing more on sustainable investment efforts, looking to support companies that have existing ESG efforts and pour their cash into funds that align with their personal values. A survey by U.S. Bank found that nearly two-thirds of Gen Z investors were more open to allocating their portfolios toward causes they care about.
While the spectrum of these causes may be broad, anything from environmental to social justice and corporate governance, there’s a clear contrast between what young and aspiring investors care more about compared to older generations.
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Florida is about to erase climate change from most of its laws
The state is spending big on adapting to sea level rise, but Republicans don't want to name the cause.
In Florida, the effects of climate change are hard to ignore, no matter your politics. It’s the hottest state — Miami spent a record 46 days above a heat index of 100 degrees last summer — and many homes and businesses are clustered along beachfront areas threatened by rising seas and hurricanes. The Republican-led legislature has responded with more than $640 million for resilience projects to adapt to coastal threats.
But the same politicians don’t seem ready to acknowledge the root cause of these problems. A bill awaiting signature from Governor Ron DeSantis, who dropped out of the Republican presidential race in January, would ban offshore wind energy, relax regulations on natural gas pipelines, and delete the majority of mentions of climate change from existing state laws.
“Florida is on the front lines of the warming climate crisis, and the fact that we’re going to erase that sends the wrong message,” said Yoca Arditi-Rocha, the executive director of the CLEO Institute, a climate education and advocacy nonprofit in Florida. “It sends the message, at least to me and to a good majority of Floridians, that this is not a priority for the state.”
As climate change has been swept into the country’s culture wars, it’s created a particularly sticky situation in Florida. Republicans associate “climate change” with Democrats — and see it as a pretext for pushing a progressive agenda — so they generally try to distance themselves from the issue. When a reporter asked DeSantis what he was doing to address the climate crisis in 2021, DeSantis dodged the question, replying, “We’re not doing any left-wing stuff.” In practice, this approach has consisted of trying to manage the effects of climate change while ignoring what’s behind them.
The bill, sponsored by state Representative Bobby Payne, a Republican from Palatka in north-central Florida, would strike eight references to climate change in current state laws, leaving just seven references untouched, according to the Tampa Bay Times. Some of the bill’s proposed language tweaks are minor, but others repeal whole sections of laws.
For example, it would eliminate a “green government grant” program that helps cities and school districts cut their carbon emissions. A 2008 policy stating that Florida is at the front lines of climate change and can reduce those impacts by cutting emissions would be replaced with a new goal: providing “an adequate, reliable, and cost-effective supply of energy for the state in a manner that promotes the health and welfare of the public and economic growth.”
Florida politicians have a history of attempting to silence conversations about the fossil fuel emissions driving sea level rise, heavier floods, and worsening toxic algae blooms. When Rick Scott was the Republican governor of the state between 2011 and 2019, state officials were ordered to avoid using the phrases “climate change” or “global warming” in communications, emails, and reports, according to the Miami Herald.
It foreshadowed what would happen at the federal level after President Donald Trump took office in 2017. The phrase “climate change” started disappearing from the websites of federal environmental agencies, with the term’s use going down 38 percent between 2016 and 2020. “Sorry, but this web page is not available for viewing right now,” the Environmental Protection Agency’s climate change site said during Trump’s term.
Red states have demonstrated that politicians don’t necessarily need to acknowledge climate change to adapt to it, but Florida appears poised to take the strategy to the extreme, expunging climate goals from state laws while focusing more and more money on addressing its effects. In 2019, DeSantis appointed Florida’s first “chief resilience officer,” Julia Nesheiwat, tasked with preparing Florida for rising sea levels. Last year, he awarded the Florida Department of Environmental Protection more than $28 million to conduct and update flooding vulnerability studies for every county in Florida.
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A Perfect Storm for Maritime Sustainability
Maritime sustainability is a broad sector, encompassing digitalization and optimization of logistics, vessel optimization and electrification, alternative low- and-zero-carbon fuels, as well as port decarbonization and infrastructure for renewable energy generation and storage and alternative fuels production, transport, and storage. The maritime industry is a key sector to meet global decarbonization targets — maritime transport accounts for 80% of global trade and 3-5% of global emissions.
The maritime sector is considered a hard to abate industry due to its asset-heavy and fragmented nature, coordination between local, national, and international actors, high dependence on infrastructure and regulation, and reputation as being slow to adapt and innovate. Despite this innovation-averse reputation, the maritime industry is currently experiencing unprecedented momentum for sustainability and decarbonization.
Regulation and Sustainability Targets Driving Demand for Sustainable Maritime Solutions
There are several key factors that contribute to the boom in demand for sustainable maritime technologies. Notably, the International Maritime Organization (IMO) recently announced ambitious new decarbonization targets: 20% decarbonization by 2030, 70% by 2040, and 100% by 2050. To meet these goals, shipping companies, port operators, and other maritime actors must begin to cut emissions immediately.
New and incoming regulations enforcing the IMO targets place additional pressure on maritime actors to comply (e.g., EU Emissions Trading System, FuelEU Maritime, California At-Berth Regulation). Where regulations have not been put in place, corporate sustainability goals, in particular emphasis on Scope 2 and Scope 3 emissions, place pressure on global shipping companies and fleet operators to cut emissions and adopt sustainable practices and technologies.
Innovators Providing Emissions-cutting and Cost-saving Solutions
A wide range of technology innovations provide demand owners (shipping companies, fleet operators, ports and logistics management) with solutions to incrementally reduce emissions. Vessel design optimization (e.g., Pascal Technologies), wind propulsion (e.g., Bound4Blue), automation solutions (e.g., Zeabuz), and logistics and routing (e.g., BetterSea) optimization software can achieve roughly 5-25% fuel savings and emissions reductions. Advancements in data analytics, AI and machine learning modelling, and continued digitalization of operations and logistics provide shipping companies and fleets with the tools to accurately monitor and report emissions.
‘War on woke’ fails to damage the appeal of sustainable ETFs
Political rows may have slowed fund launches in US, but European investors are still investing in line with principles
A political “war on woke capitalism” has soured sentiment towards investing according to environmental, social and governance (ESG) principles — delivering a blow to the whole concept of doing well by doing good. But behavioural scientists reckon that those asset managers predicting that “ESG will be dead in five years” are ignoring fundamental truths about how investors act. They have found that, while political storms might blow through investment communities, people’s underlying values change very little as a consequence.
“Evidence would suggest about 70 per cent of the investor population is willing to give up something to reflect their desire to do something in the world,” says Greg Davies, head of behavioural science at Oxford Risk, a consultancy, citing research on thousands of individuals over the past decade. On the surface, however, it can be hard to detect that underlying support for ESG investing. Fund flows into global sustainable funds turned negative in the fourth quarter of 2023 for the first time ever, according to data provider Morningstar. Investors in the US led the retreat, pulling a record $5bn from US sustainable funds. Managers, listening to the change in the mood music, launched just seven new sustainable funds in the US during the fourth quarter of 2023 — fewer than at any other point in the past three years. But, in Europe, passively managed sustainable fund strategies, including exchange traded funds, held up well. Morningstar’s research showed that European sustainable funds proved more popular than those elsewhere and garnered $3.3bn of net new money in the fourth quarter of last year. This was largely thanks to passive funds including ETFs, which collected $21.3bn while their actively managed sustainable counterparts bled close to $18bn.
This apparent demand for passively managed sustainable funds not only runs counter to the broader media narrative that we have reached “peak ESG”, but may also confound some market observers. However, James Purcell, sustainable finance executive and co-author of Sustainable Investing in Practice, argues that the sustainable investment universe is more complex than often supposed — especially when it comes to use of ETFs. “Investors with the strongest passion for sustainability are often the most demanding,” he says — and he believes this passion can actually put them off broad-based fund products that might compromise those values.
Purcell reckons there are many reasons why an investor might choose a sustainable ETF — and not all of them are related to sustainability. While some might be seeking to align their investments with their values, others might simply be swayed by ETFs’ performance in prior years, for example. “Therefore, ETF outflows do not need to imply that value-aligned investors are retreating from their commitment,” he concludes.
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