Sustainability no charity, there are fortunes to be made, says Credit Suisse’s impact advisory unit head James Gifford

The locally-born head of Credit Suisse’s global impact advisory unit says Australia could be the ‘Lucky Country many times over’ as investors scramble to fast-track decarbonisation.

Credit Suisse’s local chief investment officer Andrew McAuley with the bank’s global head of sustainability and impact advisory James Gifford and Australian head of wealth Michael Marr. Picture: John Feder

Big fortunes will be made by investors that bankroll technologies to fast-track decarbonisation as pressures further intensify on companies to move to net zero targets, according to the Australian-born global sustainability chief at one of the world’s biggest investment banks.

The Zurich-based James Gifford, one of the global pioneers of ESG – environmental, social and governance – investing, said Australian high net worth and institutional investors were increasingly pivoting to invest in technologies supporting sustainable and impact investing.

“If you’re an investor, you want to be where the growth is. Investors want to go where the future is, because where the present is, is typically already priced in,” the head of Credit Suisse’s sustainable and impact advisory told The Australian in a wide-ranging interview.

“We would never suggest that clients sacrifice returns just to make the world a better place. We believe that these companies are going to make a lot of money.

“Yes, you have to take risks when you back early stage companies. But this is where the world is heading. If fund managers do a good job at selecting companies and then backing those companies to help them grow, then there is going to be a lot of money to be made solving the world’s problems.”

Dr Gifford works with Credit Suisse’s clients and advisors to mobilise capital into impact investing, which delivers both social and financial outcomes.

For the past seven years he has taught a program at Harvard and the University of Zurich on impact investing for the next generation of ultra-high net worth family members, that has mobilised billions of dollars into impact investing strategies.

Dr Gifford was last week briefing Credit Suisse clients in Sydney on strategies to decarbonise their investment portfolios, including through investments in private equity and venture capital. The briefings continue in Melbourne this week.

His key claim to global fame was being the founding executive director – in 2003 – of the United Nations Principles for Responsible Investment, a set of ideas around sustainability.

He believed the world’s largest investors, pension funds, insurance reserves, sovereign funds, could contribute massively to achieve sustainable growth, poverty reduction and environmental protection.

Those principles are now the world’s largest initiative on sustainable investing, with thousands of signatories and trillions of assets under management.

While at the UN for a decade until 2013, Dr Gifford and his team specifically coined the term ESG to move the investment industry away from an exclusively ethical and values-based investing framework to one based on the financial materiality of sustainability issues.

In recent years there has been a sea change in Australia and globally as ESG has come to the fore for investors and corporations. Three so-called “green” directors have even secured directorships on the board of global oil and gas giant ExxonMobil.

Dr Gifford said he had been “absolutely staggered” by the evolution of the concept over the past two decades and believed the more recent rapid transformation of corporate thinking on ESG had been driven by the concept of “materiality”.

“I think a generation ago, this was not considered a material issue, it was considered a bit of PR. These were considered non-financial, sort of extraneous, do-gooder issues,” he said.

“I think what companies and boards recognise now is there are ESG issues, or a subset of them, which are highly material to the future of investment returns and corporate profitability. I think no board of any sensible company would not be talking about sustainability issues, or human capital issues, or reputational risk issues.”

Dr James Gifford, head of Credit Suisse’s global impact advisory unit. Picture: John Feder

He said the change was also being driven by staff.

“Employees of corporations are a really big driver of sustainability momentum. Large corporates know how difficult it is to acquire and retain the best talent. It’s a finite resource,” he said. “Most of the talent coming out of the world’s best universities are very environmentally aware young people. To attract them, corporates need to demonstrate they are a place these young people will be proud to work.”

Dr Gifford said he believed the key to driving decarbonisation globally would be technology companies, which presented new and exciting investment opportunities.

“We have to help investors not only get comfortable, but really excited about investing in technology. Because it is additional. Through investment, we can speed up the pace at which these exciting new technologies come out of the lab and into the marketplace. That is really the key to solving big problems like climate change and poverty. That’s a really optimistic message.”

Asked about his vision for the world in the next two decades, he said it was plausible that the evolution of battery technology would turn all renewables into low cost, base-load power sources. He also expects a proliferation of plant-based and even cellular protein products to hit supermarket shelves.

“In terms of net zero, I (also) think the pressure now on governments and corporations to have net zero targets is extraordinary,” he said.

Credit Suisse’s wealth management business in Australia was one of the first to launch a sustainable investment offering to its private clients over five years ago.

Andrew McAuley, the firm’s chief investment officer in Australia, said products were now being offered across the whole spectrum of investing.

“Our ecosystem is defined and well established. From thought leadership, leading into due diligence and what questions to ask and selecting the solutions. It’s that wholistic approach, putting the thought into action and evidencing how we’ve assessed the ESG strength of our offerings in a systematic way,” he said.

Michael Marr, Credit Suisse’s head of wealth management in Australia and New Zealand, said the bank had shied away from using third parties to deliver ESG solutions and had invested in its own infrastructure.

“As a private wealth business, we have an ambition to lead our clients into a future that’s sustainable. Many of our clients demand that of us, especially those with a greater level of awareness and acceptance of sustainability. It’s on us to help our clients benefit from the many sustainability investment opportunities that are out there,” he said.

Now half of the assets in the bank’s multi-asset class, discretionary portfolio management business are ESG compliant portfolios. Mr Marr said the transformation had really only happened in the past two and a half years.

It is also increasingly the second and third generations of Australia’s rich-listers who are shifting their impact investments from traditional areas such as medical research to tackling climate change, alternative energy production and environmental causes.

“We’re seeing it as clear as day that the next generation are now are driving investment policy within the family office – and with a heightened level of energy. Changing the patriarch or the matriarch’s mind is something that they are very, very focused on and across a number of large family relationships, they are having great success,” Mr Marr said.

Dr Gifford previously worked in Sydney as an e-commerce developer in the lead up to the first dotcom boom and later joined the Wilderness Society as their first online campaigner, where he contributed his skills to shareholder activism against Tasmanian timber and wood chipping firm Gunns from 2000 to 2003.

He completed a PhD at the University of Sydney on the effectiveness of shareholder engagement in improving corporate behaviour before moving to the UN as an intern.

In addition to his position at Credit Suisse, his other roles abroad have included head of impact investing at UBS and director of impact at TAU Investment Management.

Because of the Covid-19 pandemic, it has been more than two years since he has returned to Australia. He said his conversations with clients and colleagues since returning had been “really promising” for highlighting Australia’s prominent place in the world and its role in global decarbonisation.

“People have an advanced sense of the issues. I think Australia is very well placed. Given the vast quantities of minerals required to transition to a low carbon economy, Australia may just luck in again,” he said. “If this is the case, we really are a Lucky Country many times over.”