1. Tell us about what you do at Galvanize Climate Solutions.
I’m the Chief Investment Officer of the public equities strategy, Galvanize Global Equities (GGE). We’re a team of seven investors who, like the rest of Galvanize, invest through the lens of decarbonization, seeking to deliver compelling returns from our portfolio investments and accelerate the climate transition within the companies we are investing in.
We have two roles. First, we’re trying to deliver impact. Our impact engagement strategy with many of the companies we are invested in is collaborative across Galvanize, rather than sitting outside of our investment team. Specifically, we collaborate with our Impact team, which is made up of climate science, policy, technology and market development experts, and serves as the deepest layer of climate expertise across the firm.
Second, we have the traditional strategy management piece. According to Bloomberg New Energy Finance, investment in the transition must average $4.5 trillion annually for the remainder of this decade, or a 3X increase of the current rate of investment(1). We truly believe that investing through the lens of decarbonization is the way to capture one of the most significant changes in capital markets over the next 10+ years.
2. What characteristics do you notice in management teams that are approaching the climate transition responsibly?
We’ve observed a correlation of strong stock price performance and companies that are aligned with the climate transition. We attribute the correlation to our belief that companies that care and are taking action to deliver their role in the transition are generally good stewards and thoughtful managers. That is becoming more apparent. For example, I just got back from an industrials conference and it was stark how, now, every management team is speaking about the commercial opportunity set that they are attacking that presents itself because of the transition.
Having made that observation and having an explanation for it, one of the elements we’re looking for is companies that are early in that transition, where perhaps some management change or some commercial moment of enlightenment, has caused a company to start taking that first step on the long journey to delivering net zero goals consistent with the Paris Agreement. Where we believe there is an outsized return opportunity is being early to understand the management’s commitment to the transition, and as a result capture that potential outsized return opportunity.
3. Why did you choose to join Galvanize?
Prior to meeting Tom and Katie, I’d put a strategy document together to try and develop a strategy very similar to what we’re pursuing with GGE. I started speaking with various contacts across the market and a counterpart said to me, “if you’re going to do this, you need to do this in an aligned organization.”
At that moment, the significance of that wasn’t quite so apparent to me. But, once I started speaking with Katie and Tom, it became obvious to me that the influence we were trying to have with companies could come with far greater credibility if we landed at Galvanize, and the incremental resource of the Impact team would provide us access to resources that are atypical for an asset management firm.
Plus, when we’re able to look holistically through the decarbonization lens across the firm, we believe we’re inevitably going to understand transition pathways in a more sophisticated fashion than other managers. By sharing knowledge and insights with the other strategies, in an appropriate fashion, we’re starting to understand how industries and trends currently outside of the public markets may come to influence companies inside public markets.
4. What trends are you paying attention to in the year ahead?
One of the very obvious trends we are looking to capitalize on is the first and second order impacts of what I describe as the new global industrial policy. The IRA does two things – first, it’s going to accelerate the transition to a carbon-free economy. But second, the IRA is part of another trend that impacts the way we are investing, which is, the deglobalization of the economy. The context of a post-IRA, post-Ukraine war, global macroeconomic backdrop requires us to think very differently about assets and asset valuations than we would have done only 18 months ago.
In our portfolio, we’re trying to position ourselves to capitalize on the incentives that are being handed out through the IRA, but also to think about second order effects, such as what Europe’s response will be.
We also need to think about where there may be challenges to some of the assets in public markets, as a consequence of this requirement for sustainability and security of supply of the fundamental building blocks of the transition, that the IRA and a post-Ukraine world presents. Things like automotive assemblers, wind turbine manufacturers, aviation etc. that rely on critical raw materials/technologies that the IRA is intending to onshore in the US, face supply risk if the US fails to onshore critical fundamentals.
5. What is a common misconception about investing in the climate transition?
There are two closely associated misconceptions about investing in the transition. The first is that it is in some way concessionary, and that in some fashion we’re committing dollars to deliver the transition which will offer an impaired return versus markets. Two, which is closely associated, is that a lot of people see investing in the transition as being a narrow section of markets, and therefore in some way niche.
We see it as completely the opposite. To us, everybody should be investing some of their capital in the climate transition, because we view it as the biggest opportunity set that presents itself thematically inside global capital markets. We do not view this as a niche investment strategy – we believe being part of this large-scale transition of capital allocation has the potential to offer compelling returns.
This is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase interests in any fund or company. Nothing herein should be construed as a recommendation, representation of suitability or endorsement of any particular security or investment. The information on this page includes forward-looking statements, including about the intended capabilities of Galvanize Climate Solutions and one or more of its investment strategies. Forward-looking statements are subject to a number of risks and uncertainties, and there can be no assurance that the desired results will materialize.