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investing to protect the planet

April 2020

Planetary Boundaries: measuring the business world’s environmental footprint

The Planetary Boundary framework can help investors better understand the environmental cost of economic activity.

Businesses have a huge role to play in containing global environmental risks. And because they have great leverage on companies, so too do investors.

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The idea of “ethical” or “green” investing has gained ground in recent years, but it is hampered by a lack of quantitative definitions.

We propose that the Planetary Boundaries (PB) framework, developed by a team of leading scientists at the Stockholm Resilience Centre (SRC) and other organisations, is a good starting point.

The model identifies the nine most critical environmental dimensions  including carbon emissions (climate change), fresh water, land use and biodiversity  that are essential to maintain a stable biosphere required for human development and prosperity.

It then demarcates the "safe operating space" within which human activities should take place.

Working in partnership with the SRC and others, Pictet Asset Management has devised a way of applying the PB framework to an investment setting.

Specifically, we quantify the environmental impact for every USD1 million of annual revenue businesses generate. Such information, we believe, is a key element in the building of sustainable investment portfolios.

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