Verne Global

Sustainability | Finance |

21 October 2017

Profitable Investing While Saving the Planet, the Ultimate Win-Win

Written by Adam Nethersole

Adam is Senior Director of Marketing at Verne Global and has worked within the area of sustainability for the last 15 years.

Victor Kiam, the entrepreneur who made his fortune from Remington, was famous for his appearances in the adverts for the company’s electric razors in which he said, "I liked the shaver so much, I bought the company”.  I didn’t buy Verne Global but after spotting a billboard for the world’s leading green data center, in 2013 I did end up joining the company.

What attracted me was that Verne Global really had put sustainability at the heart of its business model. The data center is located in Iceland to take advantage of the country’s 100% green geothermal and hydro-electric power sources. Since then, sustainability has caught the world’s attention and become more than just a PR tool. At the Paris Climate Conference, 195 countries managed to adopt the first universal, legally binding global climate deal and there is forward progression despite the Trump administration in the United States.

This should give a boost to the ‎efforts from the United Nations and the Carbon Trade eXchange to create an efficient carbon trading market, which will allow investors to establish funds, exchanges to develop indices and banks to create derivatives.

However ideals are not enough. Companies, customers and their shareholders will only buy if they understand that sustainability does not mean sacrificing performance. Actually, in many cases, it can lead to better performance.

I am not just talking up Verne Global’s book. Decades of academic research has backed up findings that the business case for environmental, social and governance (ESG) investing makes sense. For example when UK’s RBS won ‘Bank of the Year’ in the Better Society Awards 2017 it said its employee engagement programme to improve sustainability generated a 5% average electricity reduction and the bank expects to save £3m in energy costs this year.

This is just one example of corporates realising that incorporating sustainability into their business model can improve profitability, help attract clients and also attract capital, as sustainable investing assets are reaching new records. The importance of a business’ environmental, social and governance performance was highlighted this year when the world’s largest pension fund, based in Japan, decided to invest some of its huge portfolio against three ESG indices.

However, the lack of comprehensive ESG data is the biggest barrier for investors according to a survey from BNP Paribas Securities Services and funds are looking for tools which allows them to report more granular ESG data for their portfolios. Stock exchanges, index providers such as FTSE Russell, sell side research and credit rating agencies are all working towards overcoming this hurdle. For example, last year FTSE Russell launched a new green industry classification for listed companies based on audited reported revenues to help track progress towards a low carbon economy.

Here at Verne Global we have already made great strides towards contributing to a low carbon economy, and just as importantly, helping our clients make a contribution. Car manufacturer BMW cut a whopping 3,570 metric tons of CO2 emissions and 82% of its operating energy costs by processing data for the development of its i-series in Iceland rather than in Germany. A good example of why sustainability is more than just good PR.

The impact on the bottom line is also important for another sector that forms a large proportion of the client base of the data center industry. It may surprise you to learn that carbon emissions from the financial services sector are larger than those from the aviation sector. You will probably find it even more surprising that between 25 and 35% of the total greenhouse gas emissions of large financial services firms come from their data center operations according to an analysis from Citihub. Iceland helps mitigate this problem, as year-round ambient air temperatures provide free-cooling which improves energy efficiency, reduces emissions and cuts building costs.

As financial services, and many other sectors look to use more and more data the carbon output of crunching all this information is only going to become more of a pressing problem. Verne Global’s clients can help save the climate at the same time as saving their money. The ultimate win-win.

Note: If sustainability within financial services is an issue you are interested in, I would recommend you to come along to our upcoming roundtable session on how a focus on ESG can improve financial performance as well as the climate - 5.30pm, Wednesday 1 November at the Dome Room, 1 Cornhill, London, You can register here.

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