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    Investors awaken to the risks of climate change

    Poppy Allonby, a senior financial executive and the former managing director of BlackRock, has been analyzing the link between climate change and investing for more than two decades. “For a lot of that, it was quite lonely,” Allonby said during her December address at the MIT Energy Initiative Fall Colloquium. “There weren’t that many other people looking at this field. And over the last three or four years, that’s completely changed.”

    Increasingly, Allonby said, investors are opening their eyes to the long-term risks of climate change — risks that threaten not only the planet, but also their portfolios. And as more institutional investors come to see climate change as a threat to their beneficiaries, they are taking action to fight it. Still, she cautioned that much more work remains to be done.

    “Various investors are at very different stages in considering climate change,” Allonby said. “Once they realize this is something they need to think about … they need to do a risk assessment, then develop a strategy.” 

    “When you look at different institutions,” she said, “some are just at the very beginning of this journey.”

    A changing landscape

    Although there is a compelling moral case to be made for taking steps to mitigate climate change, Allonby noted that institutional investors such as pension funds are bound by a fiduciary duty to their beneficiaries. That is to say, they are obligated to put their client or member interests ahead of their own.

    “I talk about fiduciary duty, because one of the things that has really changed in the investment space is that more and more investors are beginning to see climate change and climate risk as [impacting] their fiduciary duty,” said Allonby. “That has been a shift. In my mind, it makes total sense. If you’re a long-term investor … and you’re thinking about beneficiaries that need assets over the next 10 or 20 years, and thinking about risks that might materialize — and climate change, in particular — then that makes a lot of sense. But that is not where we were five or 10 years ago.”

    Allonby spent more than 20 years at the multinational investment management corporation BlackRock. For 17 of those years, she was a senior portfolio manager responsible for managing multibillion-dollar funds investing globally in companies across the traditional energy sector, and also those involved in sustainable energy and mitigating climate change. Most recently, she was head of the corporation’s Global Product Group on several continents, where she provided oversight for nearly $1 trillion assets and played a critical role in developing BlackRock’s sustainable product strategy.

    “Where I like to think the finance industry is heading is integration,” she said. “This means thinking holistically about pretty much every decision you make as an investor, and thinking about how climate risk is going to impact that investment. That is a sea change in the mentality around how people invest.”

    Divestment versus engagement

    For many years, activists have pushed for institutions — including MIT — to divest from fossil fuel companies. By keeping fossil fuel companies out of their portfolios, these activists argue, institutions and individuals can exert social, political, and economic pressure on these corporations and help to accelerate the shift to renewable energy.

    However, Allonby argued instead for ongoing engagement with fossil fuel companies, reasoning that this better positions investors to push for change. “My personal view with divesting from oil and gas companies is, that’s not very effective,” Allonby said. “I think there might be examples where you have very specific companies which you don’t think will be involved in the transition [to net zero], and [divestment] might make sense. Or if you’ve got an institutional investor where it is imperative that their investment is entirely aligned with their values — so, certain charities — it might make sense. But if you really care about change, I think you need to keep a seat at the table.”

    In a way, Allonby said, divesting from fossil fuel companies lets leaders at those organizations off the hook, reducing the pressure on them to make meaningful changes to their operations. “Imagine a company that is incredibly polluting and not sustainable, and they have shareholders that are not happy, but they don’t do anything, and those shareholders decide to divest,” she said. “What happens as a result of that, potentially, is the company goes, ‘Oh, that was easy! I didn’t have to do anything, and [the activists] have gone away.’ And potentially, those assets end up being owned by people who care less. So that is a risk, when you think about divestment.”

    Challenges and opportunities         

    Allonby outlined several challenges with climate-focused investing, but also noted a number of opportunities — both for investors looking to make money, and those looking to make a change.

    Among the challenges: For one, some investors simply still need to be convinced that climate change is a problem they should be working to solve. Also, Allonby said, there is a lack both of a formalized methodology and of specialized investment products for climate-focused investing, although she noted that both of these areas are improving. Finally, she said, it remains a challenge to encourage investors to direct capital toward clean-energy projects in developing countries. 

    Investors can both set themselves up for financial success and mitigate climate change, Allonby said, through savvy investments in either distressed or underpriced assets. “If you can buy assets that are discounted or cheaper because people have real concerns about their environmental footprint, then you can work with those companies to improve it and therefore reduce the risk and improve the valuation,” she said.

    Allonby, pointing to the high cost of waterfront property in areas that are vulnerable to rising sea levels, also suggested that the long-term risks of climate change have not been fully priced into many assets. “My view is that we haven’t really gotten our arms around that,” she said. “From a purely investment perspective, that’s also an opportunity.”

    Additionally, Allonby noted the recent rise of ESG funds, which invest with environmental, social, and corporate governance guidelines in mind. Some of these funds, she noted, have outperformed the larger market over the past several years.

    “When we talk about climate change, one has a range of emotions,” Allonby said. “Sometimes it can feel like we’re not making enough progress. And one of the nice things about being here at MIT is that whenever I’m here, I always feel hopeful about the future, and quite hopeful about all of the technologies and work that you are doing to transition energy systems and move things forward. When you look at what’s happening in the financial services sector, there’s still a huge amount to do, but it’s also quite a hopeful story.” More

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    MIT students explore food sustainability

    As students approached the homestretch of the fall semester, many were focused on completing final projects and preparing for exams. During this time of year, some students may neglect their well-being to the point of skipping meals. To help alleviate end-of-term stress and to give students a delicious study break, the Food Security Action Team recently offered a group of first-year students the opportunity to join a food tour of Daily Table, a new grocer located in Cambridge’s Central Square.

    Seventeen students along with staff from Student Financial Services, Office of the First Year, and the Office of Sustainability led the group from the steps of 77 Massachusetts Avenue a few blocks down the street to Daily Table in Central Square. As part of participating in the program, students were given a $25 TechCash gift card to shop for grocery items during the trip. To make things even more fun, MIT staff created a recipe challenge to encourage students to work together on making their own variation of quesadillas.

    Healthy, affordable, sustainable

    At Daily Table, students were greeted by Celia Grant, director of community engagement and programs from Daily Table, who led them through a tour of the space and highlighted the history and model of the grocery store, as well as some of its unique features. Founded by former Trader Joe’s president Doug Rauch in 2015, Daily Table operates three retail stores in Dorchester, Roxbury, and Central Square, and a commissary kitchen in the Boston metro area. Two more stores are in the works: one in Mattapan and another in Salem. For added convenience, Daily Table also offers free grocery delivery within a two-mile radius of its three locations.

    The Daily Table’s ethos is that delicious and wholesome food should be available, accessible, and affordable for everyone. To achieve these goals, Daily Table provides a wide selection of fresh produce, nutritious grocery staples, and made-from-scratch prepared grab-n-go foods at affordable prices. “All of our products meet strict nutritional guidelines for sodium and sugar so that customers can make food choices based on their diets, not based on price,” says Grant.

    In addition to a large network of farmers, manufacturers, and distributors who supply food to their stores, Daily Table often recovers and rescues perfectly good food that would have otherwise been sent to landfills. Surplus food, packaging and/or label changes, and items with close expiration dates are often discarded by larger grocery stores in the supply chain. But Daily Table steps in to break this cycle of waste and sell these products to customers at a much lower cost. 

    The pandemic has uncovered how difficult it can be for individuals and families to budget for necessities like utilities, rent, and even food. Daily Table seeks to create a more sustainable future by providing access to more well-balanced, nutritious food. “Even before the pandemic, it was challenging for families on limited incomes to meet the nutrition needs of their families. Post-pandemic, this challenge has now encompassed even more households, even those that have never before been challenged in this way,” says Grant. “As winter moves through, and inflation increases, the need for more affordable food and nutrition will rise. Daily Table is prepared to help meet those needs, and more.” 

    Food resources at MIT

    Downstairs at the Daily Table Central Square store, MIT staff members led a discussion about the components of a sustainable food system at MIT and beyond, shared advice on how to budget for food, and offered tips on how to make grocery shopping or cooking fun with fellow classmates and peers. “Shopping at Daily Table provides an experiential case study in solving for multiple goals at once — from the environmental impacts of food waste to healthy eating to affordability — an important framework to consider when tackling climate challenges.” says Susy Jones, senior sustainability project manager in the MIT Office of Sustainability.

    The group also discussed budgeting expenses, including food. “By taking students to the grocery store and providing some small but meaningful tips, we provided them the opportunity to put their learning into practice!” says Erica Aguiar, associate director for financial education in Student Financial Services. “We saw students taking a closer look at prices and even coming together to share groceries.”

    MIT senior and DormCon Dining Chair Ashley Holton shared her grocery shopping strategies with the group, and how she utilizes resources available at MIT. “Having a plan before you enter the grocery store is really important,” says Holton. “Not only does it save time, but it helps you avoid potentially getting more than what your budget allows for, while also making sure you get all the food you’ll need.”

    This program, along with many others, is part of MIT’s larger effort on fostering a more food-secure and sustainable campus for all students. Food Security Action Team members, including students, staff, and campus partners, are striving to achieve this goal by ensuring that there continues to be a well-organized and coordinated action around food security that can be implemented effectively each year. For example, to make shopping at Daily Table even easier, MIT has made it a priority to ensure the store accepts TechCash.

    No MIT student should go hungry due to lack of money or resources, and no student should feel like they need to be “really hungry” to ask for help. MIT offers several other resources to help students find the nutrition and other support they need. In addition, the Office of Student Wellbeing launched their DoingWell website, which offers programs and resources to help students prioritize their well-being by practicing healthy habits and getting support when they need it.

    “In my own cost-analysis comparison of staple grocery items of all the local grocery stores, no other store comes close to being able to offer what Daily Table does for the prices it does. It’s really remarkable to learn and experience just how Daily Table is changing the food system,” says Holton. “Its model is one of the many ways that will continue to foster a more food-secure community where everyone — including MIT students — can access affordable, nutritious food.” More