YOUR PORTFOLIO ESG may be encouraged to divest and buy into renewable energy . But there are potential consequences from making decisions that seem sensible on face value . “ I ’ ve increased my exposure to the green economy to 30 % of the Stonehage Fleming Global Sustainable Equity fund ,” says Shah . “ And that ’ s actually increased my carbon footprint . Making wind turbines , electric vehicles and upgrading the grid so you can attach new solar and wind farms to it in the short term are carbon-intensive activities . “ But over the longer term , they ’ re absolutely going to get us to a good place .” While switching from investment in high-carbon companies or sectors to lower-carbon alternatives may be sensible for risk mitigation over the long term , other potential problems need to be addressed . “ It can be much riskier ,” says Lisa Beauvilain , head of ESG at Impax Asset Management . “ For instance , though it depends on what type of renewable energy you are interested in , this sector can have some quite commoditised areas with low barriers
“ Dangerous rubbish ” Baillie Gifford ’ s James Anderson , the outgoing manager of the Scottish Mortgage Investment Trust , warns that commonly used ESG metrics and ratings are ineffective for measuring a company ’ s true sustainability credentials .
As an example , he points to Tesla , in which Baillie Gifford is the second-largest investor behind the company ’ s chief executive Elon Musk . Even though it is the world ’ s largest manufacturer of electric vehicles , Anderson notes standard ESG ratings suggest it is a polluter with ill-defined future metrics .
“ This is dangerous rubbish ,” he says . “ The relevant number isn ’ t the carbon Tesla expends , not even just the driving emissions removed and pollution deaths avoided , but all those plus the resultant benefits of its transformation of the rest of the industry . It ’ s all the electric vehicles made by others from Volkswagen to General Motors , because Tesla changed the world . That ’ s the scale of the contribution .”
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