Each year on April 2022 we celebrate our Planet Earth, which as a living system, changes according not only to the intrinsic but also to the extrinsic factors. Many climate scientists have shown through their research that global warming during Anthropocene has been a consequence of Human activity, accelerated by the industrial revolutions.
As awareness raised so did the pressures to move away from exhausting the limited resources our Planet has been offering us so they can be used and consumed for longer allowing future generations to also use and consume them. To do so without reducing socio-economic welfare requires updates on processes, technologies and mindsets. Investment is thus needed. Investing in our Planet, if correctly done, implies an investment in society and consequently an increase in welfare. The latter stemming from for example reduced health problems due to cleaner air resulting from improved production technologies which pollute less too.
Increasingly more investors are aware of this need and opt for responsible alternatives allocating their money in sustainable investments, enlarging the sustainable investment pie. They also show the mindset change investors need to undergo. Yet risks of continuous greenwashing in investment still exists as the OECD recently pointed out, asking for standardisation to make sustainable investments easier to track and compare. The United Nations estimated in 2018 a range of 5 to 7 USD trillion annually needed to meet the agreed SDGs by 2030. Between 2018 and 2020 sustainable assets under management rose 15% according to the World Economic Forum to about USD 35.3 trillion. Yet, this level is behind UN’s expectations by 17% on average, as shown in the graphic below created by me with UN data. The lockdowns imposed as the Pandemic emerged resulted in a slowdown of investment projects as risks of unprecedented recession emerged, and the resulting drop on the global output might explain to a great extent this deviation.
Also due to the Pandemic the issuance of sustainability bonds, green bonds and social bonds, financing instruments for socio-economic and environmental purposes, accelerated to unprecedented levels too. By the end of this year, sustainability bonds issuance is expected to exceed USD 1.5 trillion. Will the pace be maintained and the sun rise through forests expanding our life and our planet’s?