San Lie: Know and show what you own

January 30, 2024

^{This column was originally written in Dutch. This is an English translation.}

By San Lie, Director of ASN Impact Investors

The year 2023 once again broke numerous heat records. Alarming as they may be, as investors we should not wait for an alarm bell before we take action. Our choices determine the future, and that is why I would say: at least know what you are investing in and what impact you will achieve.

It had already been predicted, but at the beginning of this month it was confirmed: the year 2023 was the warmest year since measurements began in 1850. The average temperature was almost 15^oC, or 0.17 degrees warmer than the previous record year, 2016. This was reported by the European climate organization Copernicus.

These alarming numbers, but they don't seem to keep many people awake. Many of us seem to take them for granted. And then everyone goes on with their lives. That's what keeps me busy: how many times do you have to warn that it is five to twelve? When will you stop reading my columns?

The (alarm) bell

We investors know bells all too well. The bell opens and closes the market every (trading) day. But unfortunately there is no bell that indicates the low or high point of the stock market. The same applies to the alarm bell that warns us that the temperature has risen too high. The bell that warns us that it is five past twelve.

We investors should therefore know that waiting for the (alarm) bell is unwise. Returns do not lie in following trends, but rather in anticipating the pack. And that is actually exactly what sustainable investing is all about as far as I am concerned. It almost goes without saying that the earth is warming and that we must limit this temperature increase as much as possible in the coming decades while also investing in climate adaptation. But how do you translate that into an investment strategy, and then into the selection and weighting of a portfolio?

Know what you are investing in

I'm not going to pretend that it's a simple job. But after all the research, strategic thinking, decision-making and coordination with all stakeholders, it may come down to one important principle: at least know what you are investing in. And know the impact of your portfolio on the climate.

For (large) investors who are still invested in thousands of titles, knowing what you own may require additional research. However, even if selection and management have been outsourced, you retain the responsibility to ask questions and keep asking questions. How future-proof are your assets? Can I also promise my participants, whom I have just welcomed, a good pension in a livable world in approximately 40 years' time? These are difficult questions, but they are precisely the type of questions that help you make the best choices for the future.

Make choices

I see around me the parties who really want to know what they are investing in and make more informed choices also have a clearer portfolio. In short, they invest in fewer companies, which also helps them build a deeper understanding of what's going on in those companies. And it also provides more space to tell participants the stories about companies that have taken action, adapting to climate risks while actively contributing to limiting those temperature records.

Such a positive choice for a company with a future-proof vision is inspiring. So know what you own, and show what you own.

San Lie is Director of ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.

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