"A gigantic transformation process" H.S.H. Prince Max on decarbonisation of the economy

The fight against climate change is an issue that you are strongly promoting both inside and outside LGT. Where does your motivation come from?

H.S.H. Prince Max von und zu Liechtenstein: Climate change is an immense challenge - to humanity, to the economy and ultimately to our business model. As a forward-looking organisation with a commitment to serve our clients over generations, it is our duty to address climate change responsibly. Looking back, it is clear that we have already come a long way and have made significant progress. But it is also a sad fact that the pace of progress is too slow. Many things are proving difficult - and are taking longer than they should, considering the significant threats climate change poses. This makes it all the more important to keep pushing.

How can investors make a difference?

H.S.H. Prince Max: By directing capital to the areas that facilitate the progress our planet needs. Climate change is a global challenge that will not be resolved by one activity or one party. Success will depend on the sum of all the efforts and improvements across the planet. Hence it is important for us to contribute as broadly as we can. There are many relevant areas, from transport to energy to construction, that are worth investing in for both sustainability and return. These investments can make a real difference. 

Tesla is a good example of how investing in disruptive business models can lead to significant progress. In just a few years, the company has become the undisputed market leader, shaping and advancing electric mobility around the world. Innovative, sustainable technologies - some of them very promising - are also emerging in other emissions-intensive sectors. As LGT, our goal is to find the best and most promising companies and use them to drive the sustainable financial returns and the transition.

Impact investing is an important term in this context - LGT is a pioneer in this field. What is your outlook for this asset class?

H.S.H. Prince Max: I hope and expect that it will become common practice to integrate the impact dimension into business and investment management - as it is common practice to integrate the risk and return dimensions into business and investment management. I expect our value systems to change and to become much more holistic as we have been far too narrow and focused on short-term financial outcomes that have created huge liabilities. There are plenty of great investment opportunities with attractive risk-return-impact profiles, and as people increasingly care about impact, the number of opportunities will rise.

How does LGT support this development?

H.S.H. Prince Max: Education and thoughtful leadership are important. People need to understand that we have created enormous problems for ourselves by the narrow focus on short-term financials without caring about externalities. We also need to improve the understanding of climate change, its causes and its far-reaching effects. Many people still don't understand how climate change works, what the key interdependencies are, and how policies can play an important role. It is our responsibility to talk to our clients, to foster education and to facilitate smart ways of engagement to show leadership.

What do you mean by that?

H.S.H. Prince Max: If one understands a problem in a comprehensive way, it is much easier to address it and to change behaviour. Additionally, it helps to work and to engage with people who have gained prior experience by having moved early and having shown leadership and foresight. We have seen these change processes before - for example around smoking. By educating people, highlighting the negative consequences and providing the right incentives, society's attitude towards smoking has changed. I expect a similar turn-around to occur around other areas of concern including obesity and climate change. Both cause much more severe economic consequences and human suffering than smoking, and hopefully we can go through a similar change processes. A special challenge around climate change is that it becomes dramatically more difficult to correct our wrongdoings if we do not act fast. The urgency is very high.

So, are you confident that we can meet this enormous global challenge?

H.S.H. Prince Max: The more climate change progresses and the more obvious the negative consequences become, the greater the pressure to change. We are in the midst of a gigantic transformation process to decarbonise the economy and create a more sustainable environment. Like most transformations, the process is not linear. Unfortunately, the fundamental driver of this change is the increasing damage caused by climate change. The question is not whether change will happen, but when and how fast.

About H.S.H. Prince Max von und zu Liechtenstein

H.S.H. Prince Max von und zu Liechtenstein is the Chairman of LGT Group. Previously, he was CEO of LGT from 2006 to 2020. Prince Max holds a master’s degree from Harvard Business School. Since the beginning of his tenure at LGT in 2006, the international private banking and asset management group has increased its assets under management from approximately CHF 70 billion to CHF 356 billion. LGT is fully controlled by the Liechtenstein Princely Family and employs over 5800 people in more than 30 locations worldwide. H.S.H. Prince Max is the founder of Lightrock and LGT Venture Philanthropy. He is also Chairman of Lightrock and a member of the Foundation Board of LGT Venture Philanthropy.