The Most Important Themes Facing Green Investors in 2023 –

Posted on

2022 brought historic agreements from the COP summits, the passage of a climate bill in the U.S., and a global spike in emissions. We break down the year that was. Plus, tighter regulations, stricter standards, the transition to renewables, adaptation and relentless climate disasters are just some of the main themes facing countries, companies and investors in 2003. Meggin Thwing Eastman of MSCI rejoins the show to share her team’s ESG and Climate Trends to Watch for 2023 report.

Investing for good

After gaining mainstream attention in recent years, the environmental, social and governance (ESG) investing trend is expected to become more popular in 2023 — and beyond.

Sustainability has become a major focus of ESG investing as investors seek to align their investments with their values and prioritise companies working to address environmental and social issues.

“The US Senate’s passing of a sweeping $430 billion bill to help fight climate change underscores why every investor needs exposure to ESG investments to build wealth over the long term,” says Nigel Green, chief executive and founder of deVere Group.

Global ESG assets are on track to exceed $53 trillion by 2025, according to Bloomberg Intelligence, representing more than a third of all assets under management.

The trend is driven by investors who want to not only generate financial returns, but also make a positive impact on the world. Increasingly, they are demanding greater transparency from companies around ESG credentials of businesses.

This includes the disclosure of information about a company’s environmental and social impact, as well as its governance practices.

ESG Is Going to Have a Rocky 2023. Sustainability Will Be Just Fine.

The passage of the 2022 Inflation Reduction Act by U.S. lawmakers was more of a climate bill in disguise. Over $350 billion was dedicated to green energy programs, tax rebates, and infrastructure development. That put a temporary charge into solar and wind stocks as well as companies around the electric vehicle ecosystem. The COP27 summit, held in Egypt last fall, saw the last-minute adoption of an agreement by richer nations to create a loss and damage fund that is designed to send aid to vulnerable countries devastated by the irreversible harms of global warming. Details still need to be worked out, and the agreement did not go so far as to increase ambitions on lowering emissions or take any new steps to preserve the 1.5 degrees Celsius limit for warming temperatures, but still some rare progress out of a COP meeting.

At the COP15 gathering in Montreal in December, an agreement was reached to protect a third of the Earth’s land and water by the end of this decade and may have the potential to shake up the regulatory landscape for the green investment industry. The landmark deal, which is called the Kunming-Montreal Global Biodiversity Framework, drew wide praise from governments that wrote and signed it as well as by the private sector, environmental organizations, and even activists. We’re going to look for more details on that agreement this year.1

The planet got a lot hotter in 2022. Emissions from the burning of fossil fuels and cement production rose an estimated 1% last year over 2021 to 36.6 gigatons of carbon dioxide. That’s even higher than 2019 levels, the year before the pandemic, according to the Global Carbon Project. Oil use led the 2022 increase, specifically for aviation as international travel rebounded towards pre-pandemic rates. Both oil and coal finished the year in higher demand than in 2021, and Russia’s invasion of Ukraine set off an energy crisis in Europe that led to the increased burning of coal by countries impacted by skyrocketing prices and shortages.

The state of California made historic investments in climate measures in 2022, as Governor Gavin Newsom signed more than 40 bills to fight climate change in September. The California Climate Commitment, as it’s called, adds bolder climate pledges, including reducing oil use by 94% from 2022 levels by the year 2045. The plan also sets more aggressive goals of cutting carbon emissions by 48% below 1990 levels by the year 2030, up from the 40% by 2030 required under state law. Net zero emissions would be achieved in 2045 if these commitments are honored according to the plan. California also phased out sales of new gas-powered cars by the year 2035 and set a more stringent low-carbon fuel standard and streamlined citing and permitting of renewable energy projects. In all, the Golden State plans to spend more than $45 billion towards its climate commitments through the year 2045.2

Leave a Reply

Your email address will not be published. Required fields are marked *