Over the past decade the rise of ESG investing has been dramatic. According to US SIF, a trade group for sustainable investing, U.S. based sustainable investments are $17.1 trillion at the start of 2020, up 42 percent over the past two years.

Despite a global pandemic, several stock indices were up meaningfully in 2020 including the S&P 500 which returned 18.4% and the NASDAQ which was up 43% (having doubled over the past two years).

We started the year with Larry Fink’s annual letter to the CEOs of the world’s largest companies, in which he declared that “climate change has become a defining factor in companies’ long-term prospects.”

Redwood Grove Capital launched in 2017 because we had a differentiated, contrarian market view. 

The Fourth National Climate Assessment, released in 2018, predicted that the U.S. economy could shrink by up to 10% annually if significant steps are not taken to rein in global warming.

In this letter, we are going to discuss why climate issues have become increasingly important for long term investors.

In this letter, we dive into the technological shifts that are de-carbonizing transportation.

Incorporating climate science into an investment model can help investors, not just drive capital to much needed mitigation solutions, but also capture the last major market inefficiency and active alpha opportunity.

One of the greatest potential areas to reduce GHG emissions is urban design. Today 55% of the world’s population, 4.3 billion people live in cities.