Climate change sectors heat up

Sustainable investing has seen considerable growth over the last five years and shows no sign of slowing down, as awareness around crucial sustainability topics continues to grow. We have seen a steady pace in sustainable investment asset growth in Europe, North America and Australia. And for Asia, the region has quietly caught up, with more than double the asset growth in this space than any other region. In the past year alone, funds associated with climate change saw some of the highest investor inflows, in part boosted by government stimulus steered towards national climate-change goals. Such robust growth suggests to us a marked shift in both investor and company attitudes towards environmental, social and governance (ESG) factors. There’s debate among market commentators whether integrating ESG considerations in actively managed strategies can lead to beneficial outcomes for the environment—without sacrificing returns for investors. We have found that the two goals are not mutually exclusive and can often be quite complementary. In 2020, public health challenges surrounding COVID-19 meant that political focus in addressing the world’s climate challenges had to take a back seat. Despite a 6 percent annual drop in carbon dioxide emissions in 2020 brought on by COVID-19 lockdown measures—where, for example, some residents of India were able to see the Himalayan peaks for the first time in decades—pressing global climate issues remain as economic activity resumes. On the whole, the planet faces significant challenges in meeting the objectives of the 2015 Paris Agreement, where governments have signed up to limit global warming to well below 2 degrees Celsius above pre-industrial levels. Since 2015, greenhouse gas (GHG) emissions have continued to steadily rise.

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