Investors are more and more considering climate change as a major concern and considering greener portfolios as an option. Investing in some industries can contribute more to carbon emission than others, and this indirectly contributes to the problem.
The effects of climate change are becoming increasingly obvious. Oceans are warming, ice sheets are shrinking and glaciers are retreating. Sea levels have risen about 8 inches in the last century and there are more and more extreme weather conditions.
Why is it taking so long for us to come to terms with this? According to neuroscience, the human brain simply does not compute, because the brain is not wired to respond readily to large slow moving threats. It is much more responsive to immediate threat such as ducking a miss-thrown baseball in milliseconds, and our brain’s first and primary job is to protect ourselves. Humans are typically way more responsive to the threat of immediate loss than they are long-term loss.
We also have a cognitive bias towards instant gratification. This is evidenced when it comes to organizations and employee retention, often stuck in short term thinking about profitability. Investors are often more interested in pressuring for quarterly returns than they are for long term stability. This results in companies ending up with a culture of “short-termism. Investing in training for employees, for example, can wait.
The good news is that things are slowly changing. More companies are beginning to move away from quarterly reporting to semi-annual reporting. For sustainability to exist though we need to practice self-control. This applies whether we are eating or saving for retirement. Self-control is a key element of emotional intelligence. It’s not that we are not concerned about the environment, it is just that there are so many seemingly urgent concerns getting in the way. It requires us to stay mindful of the long term effects of our actions and not just to operate on automatic.
In addition to an inclination for immediate gratification, humans are also hard-wired to hoard and acquire more material possessions than are immediately required such as property and food. The drive for survival by acquiring more than is immediately needed has been a part of our psyche for hundreds of thousands of years and is still with us. This behavior is not likely to change overnight.
The question then is how do we engage people so that their reward system includes saving the environment? After all, asking people to do without certain things so as to help save the environment can seem like a hopeless task. Apathy that exists towards climate change can be explained through psychology. We continue to view the problem of climate change as something that is still distant and our mindset includes optimism bias that helps to prevent us seeing this as something that will affect us individually.
The problem is that there is no direct link between the way we act and the consequences of those actions. We often use plastic bags when shopping instead of reusable ones because it is convenient in the short term and in our rush for this convenience we overlook the long term benefits of minimizing waste. The good news is that we are becoming increasingly environmentally aware, the question is will this be enough to save ourselves from losing the very systems that support us?
