Here are three focus areas for sustainable investing in 2024
Climate change: Munich Re found thunderstorms and earthquakes cost the globe about USD250 billion (R5 billion) last year. Additionally, the Christian Aid NGO found that the 20 costliest climate disasters of 2023 consistently impacted the globe’s poorest populations – those least able to afford to rebuild – the most. 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.
Biodiversity loss: This is the year we’re likely to see significant increase in investments in companies contributing to combatting biodiversity loss.
- The WEF says over half the global economy – worth about USD44 trillion (R831 trillion) – is dependent on nature
- Global pollinator population declines are impacting crop fertilisation, jeopardising world food security
- The FAO estimates about a third of all food is wasted annually
- The WWF documents a 69% average loss in mammal, bird, reptile, fish, and amphibian species from 1970 to 2022
Moving to a nature-positive economy could unlock USD10 trillion (R190 trillion) in business opportunities and social returns, according to the WEF.
Human rights abuses: Just 11% of companies actively monitor risks with their global suppliers, such as child labour or living wages, according to the Corporate Human Rights Benchmark. Regulatory shifts will probably prompt this to change at pace. The Corporate Sustainability Reporting Directive in the EU, for example, now requires large companies to disclose their impact on people and planet.