Initial Impressions

I write this post approximately a week after my team and I had our first virtual meeting with our client. Preparing for the meeting, I had poured over any publicly available information I could find: holdings, filings, portfolio value. And I had, of course, meticulously studied the company website. All this had led me to form expectations of what the meeting might look like – a typical portfolio manager coming in at least 5 minutes late, being pressed for time the entire meeting, and running off right at the 30 minute mark (I had my previous experience in finance to thank for this). This is probably why I was so pleasantly surprised when our client opened the first meeting by telling us at length how passionate he was about working with us, how immensely important he considered this consulting project, and how much he was looking forward to getting going. And get going we did. By the time the meeting had ended – 20 minutes later than planned – we had already formed an initial target list of companies we’d like to explore. The excitement was palpable in the room. Our client’s enthusiasm and passion – combined with our excitement of having been chosen for this project – got our mental wheels spinning. How could we take this project and turn it into something not just insightful, but actionable. How could we come up with quantitative and qualitative factors that could, one day, be used for screening potential sectors, companies, and industries based on their resilience (or lack thereof) to climate risk. 

The task is indeed very exciting. As I reflect on the companies we will be researching, I am overcome with excitement and impatience – I want to dig in! There are so many angles to explore, so much to learn and analyze. We as a team decided to focus on three companies: one in the aerospace industry, one in farming/agriculture, and the third in the fashion/apparel industry. Each of them faces a unique set of challenges as climate change affects each industry in very specific, yet oftentimes, overlapping ways. Being global in scale, neither of the three firms has a choice – or desire – to ignore climate risks. 

The aerospace industry faces increased pressure by consumers to reduce their carbon footprint by switching to biofuels. But is biodiesel or hydrogen the future? Given that these cleaner fuel sources will take a while to get adopted – time which we do not have – how should the airline industry respond to the challenges of climate change? As a self-declared aviation geek, I am thrilled to be working on this company. 

Farming / agriculture has an even larger share of greenhouse gas emissions to worry about. From methane produced by cattle to deforestation with the intent of increasing farmland, challenges faced by this industry are probably the most severe. And how does one of the largest manufacturers of farming equipment combat these challenges? How does it prepare for the future of farming – whatever form that may take? These are fascinating questions to answer. 

Fashion seems to be having a moment of reckoning – at long last. As people take notice of the degree to which the fashion industry relies on petrochemicals, employs cheap labor in the developing world, and pollutes the planet with the fabric waste that fashion firms generate, profit margins are shrinking. Younger generations of more environmentally conscious shoppers are shying away from fast fashion in favor of second-hand, vintage apparel. How will this company respond to these mounting challenges? Given that its clientele is mostly young and/or the affluent, how will it use its brand and corporate values to combat the risks posed by climate change? I am looking forward to learning what measures the industry is taking, and what effect, if any, these measures yield. 

There is no doubt in my mind that as the weeks progress, I will reflect more and more on our relationship with the client, the team, and the target companies. In a way, it will be very interesting to see how my initial impressions develop further, and what yet unknown insights we as a team are able to derive from our time working together.