Sustainable development is underpinned by three goals:
- environmental protection
- social progress
- economic growth.
When tackling global issues, the aim is to manage these goals simultaneously, avoiding trade-offs. For example, economic progress should not be at the detriment of the environment or increasing inequalities.
Governments and organisations around the world use these criteria in their decision-making as they address some of the most pressing global issues, or 'megatrends', that we face today.
Global sustainability megatrends
Global megatrends such as population growth, aging societies, rapid economic growth, pressure on resources and urbanisation are the underlying drivers for sustainability, therefore increasing demand for responsible investment.
Your client may be motivated to respond to some of these issues to help make the world a better place, for themselves and for the next generation too. However, it's important to note that there are fundamental investment risks and opportunities associated with many of these trends too. Managing these risks and opportunities through responsible investment approaches can help protect and enhance financial returns. Here are a few examples:
Greenhouse Gas (GHG) emissions, which contribute to climate change, are a by-product of a wide range of industries and the impacts are far-reaching too.
In many countries, industries with high Greenhouse Gas (GHG) emissions, such as energy, mining, petroleum and transportation industries, are affected by regulations dealing with GHG emissions.
Insurance and infrastructure industries are being impacted by adaptation policies in response to climate change. Meanwhile, agriculture, food, beverage companies and tourism industries are being affected by the weather-related impacts of climate change.
|Companies offering innovative solutions such as carbon capture and storage systems, renewable energy and companies with low carbon and sustainability commitments stand to benefit from this long-term trend.
The UN describes human rights as the rights inherent to us all as human beings, including the right to life, freedom from slavery and the freedom of opinion and expression.
Unfortunately, human rights violations occur across the world, with particular sectors such as mining clothing and food industries at higher risk.
Companies neglecting human rights are exposed to operational, legal, and regulatory risks and reputation risks, all of which can impact their ability to create value for investors. For example, a clothing manufacturers operation could be undermined by employee strikes and walkouts, legal and regulatory fines and reputational damage leading to reduced consumer demand for their products.
Particularly in high risk sectors, companies paying attention to human rights and ESG factors generally have a lower level of risk.
Companies managing human rights risks and promoting the best labour practices lead to higher employee engagement and retention rates, less health and safety related absences, all of which impact the bottom line. Furthermore, consumers are more likely to buy from a company treating it’s employees well, and may even be willing to pay a premium for this and wider sustainable practices.