Outlook 2023: Sustainability: five trends to watch
Andy Howard, Global Head of Sustainable Investment at Schroders
As it matures and evolves across asset classes and geographies, Andy Howard, Global Head of Sustainable Investment at Schroders, considers the future of ESG and impact.
With the world continuing to emerge from Covid-19 lockdowns, cracks in economies, societies and environmental ambitions are becoming clearer.
Looking ahead to 2023 and beyond, the debt legacy from that crisis is limiting governments’ capacity to continue supporting societies through difficult times.
We’re likely to see more interventions and business will be expected to play a greater role in tackling critical issues from climate challenges and biodiversity threats to the cost-of-living crises.
In short, the future looks like it will play out very differently from the past. In that context, a fund manager’s active management and ability to adapt investment strategies to the challenges and opportunities ahead will be more important to investment performance than ever.
1. Climate change and political will
First, climate change is an unavoidable question. All investors are exposed to the impact, not just of global warming and environmental damage themselves, but of political and economic action to tackle their causes. Investors must make sure any exposures to these risks are considered thoughtfully and managed alongside opportunities in solutions to the climate challenge.
At Schroders, we committed to transitioning toward net zero over the coming decades, including setting a Science-Based Target, validated by the Science-Based Targets initiative earlier in 2022.
But setting a target is the easy part. How we, and other businesses, decarbonise is critically important to the value we will create for our clients. Our Climate Transition Action Plan outlines our roadmap.
Political momentum clearly slowed in 2022, but importantly the private sector continues to push ahead, helping close some of the gap between the ambitions global leaders have laid out and corporate readiness for transition.
The COP27 climate summit in Egypt in November did little to cement global commitments to action. That said, agreement on a “loss and damage” fund to help developing nations should ease one key challenge to delivering the changes needed to reach the goals laid out in Paris in 2015. Attention will turn to COP28 in the UAE later in 2023.
Our focus has been on using our voice and influence to engage the most exposed companies and pushing them to lay out transition plans. In the year ahead we will be intensifying those efforts.
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