In 2020, global sustainable investment grew to $35.3tn (R662tn) across five major markets. 2024 will be the year sustainable investing ‘grows up’, grows expansively, and convinces more stakeholders that deploying capital to creative, circular solutions and the most financially viable companies, is pivotal for our planet’s future.
The Intergovernmental Panel on Climate Change says that it’ll cost about 2-4% of global GDP (by 2050) to limit global warming to 1.5%. With humanity’s future hanging in the balance, this seems a very small price to pay.
Sustainable investment is one of the best, most innovative means to redeploy capital where it counts. Now is the moment to correct our global ecological overspending to arrest further depletion of precious shared resources. With this comes significant opportunity.
Investors play a pivotal part in choosing which companies to invest in. Additionally, asset managers have the responsibility to call out the laggards and champion the leaders. We’re at the point where a business’ sustainability agenda should impact its bottom-line.
Here are three focus areas for sustainable investing in 2024:
Developing countries – which also have less of a role in causing climate change – will be the hardest hit by food insecurity, water scarcity, infectious diseases, and loss of livelihood. Recent flooding in KwaZulu-Natal is evidence of this.
To move to a carbon-neutral world by 2050, we must justly transition to renewables. Right now, the financial sector is not pricing in climate-transition risk sufficiently. Due to a lack of a clear policy signal, many asset managers have adopted a wait-and-see strategy, meaning there will be no massive reallocation of capital.
This simply cannot continue to be the case. The net-zero transition calls for massive investment. The global grid alone needs to increase fivefold to support the more renewable energy. Now is the time for asset managers to ‘back’ the carbon winners of tomorrow.
The World Economic Forum (WEF) says over half the global economy – worth about $44tn (R831tn) – is dependent on nature. Global pollinator population declines are impacting crop fertilisation, jeopardising world food security. The Food and Agriculture Organization (FAO) estimates about a third of all food is wasted annually. The World Wildlife Fund (WWF) documented a 69% average loss in mammal, bird, reptile, fish, and amphibian species from 1970 to 2022.
Moving to a nature-positive economy could unlock $10tn (R190tn) in business opportunities and social returns, according to the WEF.
ESG is a global megatrend. At Sanlam Investments, sustainability is part of our DNA. Our investments are rooted in making a meaningful impact towards a better future – environmentally, socially and from a governance perspective.
South Africa and Africa urgently need to tackle critical challenges such as energy-, food- and water security. We all need to share responsibility for safeguarding our resources and bolstering resilience in our most vulnerable communities. That’s how we empower all Africans to be financially confident, secure, and prosperous.
It’s not too late.
We can still course correct, but only if we act today. Asset managers and investors should be confident that they have a pivotal part to play in directing capital to where it’ll have maximal impact in a future we need.
