BT500: 'Energy transition investment is one of the biggest wealth creation opportunities,' says Harvard's Vikram Gandhi

The energy transition investment opportunity for investors is one of the biggest wealth creation opportunities that the world sees, said Vikram Gandhi, professor at Harvard Business School. "It manifests in various ways. Investors are trying to see that, and appreciate that. It's a huge source of alpha and it will start trickling down to India's wealth," he said while speaking to Business Today TV Managing Editor Siddharth Zarabi at BT500 Wealth Creators Summit.  

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Speaking on the topic: 'The Sustainable Path to Profits', the professor said the mindset currently is that sustainability may come at the cost of profit. However, he said, sustainability is not about sacrificing profits, "it is about good business". He said nearly about 35-40 per cent of all investors - and this is about 35-40 trillion dollars if one looks at the whole equity market which is 100 trillion-plus - has some sort of sustainable angle.  

Gandhi touched upon one of the major concerns of the companies that whether those firms adopting sustainable models are being rewarded. He said studies done by Harvard for publicly listed companies showed while there may be some near-term hit, the multiples of companies that have sustainable glide paths, trade at much higher multiples.

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The professor then gave an example of power-generating companies. He said the power-generating firms are the biggest polluters because, historically, they have been based on thermal, coal, and gas power. 

"If you look at utilities (power-generating firms) which have proactively moved from sourcing their energy - to create electricity - from coal and gas-based to renewable-based, their stock prices have significantly outperformed the ones that have not."

Gandhi said that climate change is a "slow burn" and that companies need to do something about it. He said while it is true that this problem was created by emissions from industrialisation in the West, the biggest negative impact is going to be in places like India. 

"Mumbai is viewed as one of the top ten cities to be submerged in the next 25 years because of cyclone intensity, water level, and the concentration of monsoon compared to other cities in the world - every citizen and business have to do something about it."