As long-term investors in the environmental economy, we recognize that the transition away from fossil fuels will come with tradeoffs and pain. Humanity has yet to acknowledge there is no free lunch in economics, no perpetual motion machine in science, and no form of energy that comes without cost. These truths are rightfully exposed in the film. But weighing the costs and benefits of the myriad forms of energy against each other is a very complex exercise. As such, director Jeff Gibbs’ claims are too often superficial, based on half-truths, and sometimes just plain wrong.

One example is the singular focus on the shortcomings of renewable energy technologies. In most cases, these technologies are in the early stages of tremendous development curves, yet in several instances, the film focuses on versions that have long since been replaced. For example, the camera sweeps past largely abandoned solar thermal arrays in a desert yet keeps newer photovoltaic solar technologies out of the picture. Gibbs interviews skeptical American solar installers about the poor performance of older thin film photovoltaic technologies instead of highlighting the amazing breakthroughs in modern silicon-based solar technologies.

In many jurisdictions, solar is now the cheapest way to generate electrons. It can be as little as half the cost of coal and natural gas. At only 2% of global installed electricity generation, plenty of solar growth is possible before intermittency becomes a challenge. Solar is not perfect, it cannot alone replace fossil generation, but it is absolutely going to be part of the solution.

One technology the film rightfully exposed is biomass. Burning wood to generate electricity is neither sustainable nor renewable. Trees simply don’t grow fast enough to sustainably supply scale-efficient biomass plants. They are often too green to burn on their own, requiring rubber tires or other fossil-based accelerants. Considering the importance of our remaining forests, clearcutting timber, often to be shipped great distances to subsidized markets, makes little sense to us.

By their nature, documentary films are supposed to expose mistruths; this one often amplifies them. Gibbs and Moore clearly had an agenda. The narrator leaves us feeling he’s uncovered a series of dirty little secrets: Did you know the steel in wind turbine towers are made with coking coal? And the switches in wind turbines contain sulphur hexafluoride – isn’t SF6 the most potent greenhouse gas known to man? Did you know solar panels aren’t made from sand, it’s actually mined quartzite and metallurgic coal? These rhetorical tricks are commonplace in Michael Moore films. It’s not like anyone was trying to conceal these ingredients.  For those that have paid attention, they are simply the trade-offs that all energy technologies need to make.

We believe it makes sense to ‘invest’ some of our scarce and dirty fossil fuels today in the more efficient production of fossil-free electricity for the future. Yet the narrator’s agenda is laid bare when he asks a young activist, “so renewable energy is basically just fossil fuel?” Absolute gold to the pro-fossil far right.

It’s not easy to produce a film that appeals at both ends of the political spectrum but Moore and Gibbs have something for everyone. Having turned renewable energy into a fossil fuel doppelganger, the film shifts focus to a group of plutocrats supporting the energy transition: people like Al Gore, David Blood, Richard Branson, Michael Bloomberg and Jeremy Grantham. As environmental investors, this part of the movie was particularly challenging for us to watch. These characters could have chosen many paths in life, but like us, have chosen to focus their energy on supporting environmental solutions.

We assume they also believe capital investment is a crucial part of transitioning to a more sustainable future. But this can come with the appearance of conflicts of interest and self-righteousness. In these times of massive inequality, wealth makes them popular targets today but their legacy will likely be much more nuanced than Moore and Gibbs suggest.

That said, the film rightly takes aim at large asset management companies that are increasingly using environmental challenges and the climate crisis as a moral shield to shill even more of their fee-producing products. Hidden behind confusing labels like ESG, sustainable, responsible, and impact, these firms are packaging investment vehicles filled with companies whose products and services do not solve environmental challenges and often make them worse. In our opinion, this “greenwashing” of capital investment should have been the singular focus of Gibbs and Moore’s film. More than the shortcomings of emerging renewable technologies or the motivations of green billionaires.

Human greed, selfishness, and unsustainability is most pervasive in capital markets these days. And it is increasingly being hidden behind so-called “ethical” labels. The greenwashing of investment management is a documentary film the world really needs.

John Cook and Greg Payne are the Greenchip Financial Co-Founders.

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Nixon’s leadership should be saluted, but an opportunity was missed that day. He could have asked all people, not just banks, to consider the impacts of their investments – to help make the world a better place while also improving their investment returns.

That he didn’t make this broader appeal is no surprise. Impact investing, as it’s typically (and narrowly) defined, is at best a niche concept. It incorporates a range of emerging investment products like social impact bonds, microcredit financing, green building mortgages, social venture funds, and so on. These products are mostly being adopted by private foundations, and now banks are embracing them as bolt-on strategies that extend their mission or brand.

These allocations by foundations and banks, while a start, will be inadequate to meet our greatest social and environmental challenges. Royal Bank’s $20 million commitment, for example, is like finding a penny in a couch cushion for an institution with $750 billion in assets.

A much broader approach is required. Impact investing should be defined more by philosophy and strategy than by products. It should embrace all investors, partially because it will take a collective effort to build a more sustainable future but mostly because it can be the path to superior investment returns.

The challenges confronting the world today are daunting. After quadrupling in the 20th century, our current global population of about seven billion is expected to grow to nine billion by 2050. Yet the energy discoveries that have fuelled the expansion to date are declining in productivity, and new discoveries are not keeping pace with this decline.

Meanwhile, the ability of the globe to supply sufficient quantities of clean air, water and productive land in the face of continued population and industrial expansion is by no means a certainty. These questions of resource and environmental sustainability occur against a backdrop of geopolitical tensions, unprecedented imbalances in trade, and an evident shift in economic power from the West to the East.

When confronted by an uncertain future of growing challenges, an appropriate societal response is to save more for the proverbial “rainy day” – deferring some current consumption to invest scarce resources in infrastructure that will provide future returns. Yet, while global savings rates have remained stable in recent decades, in the Western “advanced” economies, savings have dropped from 22 per cent of GDP in 1980 to only 18 per cent in 2010. In the United States, where savers have been punished with near-zero interest rates for most of the past decade, savings are at all-time lows of 12 per cent of GDP.

And where have our reduced savings been directed? In what industries are we investing for future returns? Not, in our minds, where impact is needed.

Despite an arguably low-ball estimate by Booz Allen Hamilton in 2007 that the world faced a $41-trillion deficit in power, transport and water infrastructure, and despite America’s property market collapse with unoccupied homes and homeowners in default remaining at record levels, Americans still invest more in their private homes than in public water and transportation infrastructure. Globally, over the past five years, equities in the consumer discretionary sector have been among the top performers while capital goods and utilities have lagged. Far from saving for a rainy day we are indulging our live-for-the-moment society.

A broader definition of impact investing would bring the traditional concepts of investment back to financial markets that have strayed too far from their roots. Investing with impact requires a direct connection to real capital projects that will bring real productive returns in the future. It requires the patience to realize those returns on the time scale of years – even decades. In contrast, financial markets today have an ever-shortening time horizon where returns are more often than not derived from zero-sum game tactics such as market timing or high frequency trading. In effect, the financial world has become completely preoccupied with price movement – and has little interest in value creation.

Under our broader definition, more impact capital could be directed to economic value creation. For long-term savers, the returns would be tough to beat. Consider the performance of historic investments in rail, roads, generating plants and so on.

For example, the hydroelectric generation facility at Churchill Falls in Quebec cost $942 million to build in 1970 ($6 billion in 2012 dollars). But we would value the asset at between $15 billion and $25 billion today based on cash flow produced and replacement value. And this doesn’t include the four decades of emission-free electricity it has contributed to Quebec’s power system.

California completed the San Francisco Oakland Bay Bridge in 1936 at a cost of $77 million ($1.24 billion in 2012 dollars). A recent bill to repair just the eastern span of the bridge came in at $6.3 billion. These are not unique examples: The valuations of existing infrastructure have massively exceeded inflation in the developed world. Chances are new infrastructure in the developing world will see similar returns over the coming decades. And these types of investments are accessible to all investors through publicly traded utility firms, the manufacturers of utility equipment or the engineering firms that build and maintain the infrastructure.

While a publicly traded company that makes subway cars, electrical transformers or solar panels may not have the obvious social impact of a public housing bond, we would contend that directing capital towards infrastructure and away from instant-gratification strategies helps make markets and our economy more sustainable. As the Booz Allen report demonstrates, the need for this kind of capital is far greater than the niches to which impact investing has been attached so far.

So what would this broader definition of impact investing look like? Here’s one possible wording: Impact investing forces traditional financial investors to consider value creation (vs. price appreciation), social and environmental impacts and risks, and longer-term investment horizons, all in service of maximizing investment returns.

The concepts of long-term investment horizons, thoughtful risk management, and value creation are historically attractive attributes of successful investors, yet these are the disciplines so many investors seem to have abandoned. Defined this way, even bank executives could feel comfortable asking all their customers to consider the benefits of impact investing.

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