First the good news
We feel positive about the regulatory developments seen in 2022, including the Inflation Reduction Act in the US and European REPowerEU plan, which are both focused on scaling up green energy to improve energy independence, while making ambitious progress on national decarbonisation targets. The fact that these plans were received generally with support from across the political spectrum is a positive omen for the future – making climate action less politically divisive and therefore improving our chances of meeting targets year-on-year.
Other significant developments include the agreement on a Carbon Border Adjustment Mechanism (CBAM) by the EU Parliament. The first of its kind, this system puts a price on imports from carbon-intensive industries and puts a cost on “offshoring” our western consumption’s carbon impact. France and Belgium’s ban on short haul flights and Brazil’s re-commitment to end deforestation are also some positive news for our planet. EQ Investors’ (EQ) Climate Action Portfolios aim to contribute to climate action and capitalise on the opportunities this transition presents.
We had been concerned that the COP15 biodiversity conference would mirror its big brother climate meeting – COP27 and disappoint in its outcome. Thankfully, we heard the very welcome news this morning that nations had agreed the 30×30 deal: to conserve and/or restore 30% of natural land for biodiversity protection
While we are indeed facing humanitarian crises across the world, we should note positive social developments in 2022 too. We have been excited to see the significant breakthroughs in breast cancer (AstraZeneca) and Alzheimer’s disease (Biogen) treatment, for example.
2022 has been a challenging year for sustainable investors but at EQ we have stuck to our convictions, pushing for sustainable systemic change. We also worked hard to communicate the positive achievements of the companies and projects our sustainable portfolio ranges support in 2022. We have continued to innovate, for example through launching a new interactive carbon calculator and the most comprehensive positive impact report yet.
The not so good news
Despite these positive reflections, 2022 saw us face exceptional challenges too. The War in Ukraine, and the intensifying cost of living and energy crisis are amongst the biggest humanitarian issues we have faced in a decade.
Investors have been affected by these too, and in turn it is our responsibility to help alleviate these where we can. For example, ShareAction’s living wage investor engagement group is focusing on zero hour contracts and improving workforce policies to provide greater security in a world of rising living costs.
We are increasingly worried about the role of the biggest polluters in lobbying for “business as usual”. It is here where investors can add value. EQ Investors has used its connections with asset managers to push forward the integration of biodiversity risks in investment analysis and engagements to improve companies’ data disclosure on the issue. Only this way we can build the data baseline from which biodiversity degradation can be managed.
Looking forward
Looking forward, we think client demand for investing in line with sustainable outcomes is far greater than what is currently met. We are excited that the regulator in Europe and the UK is putting a focus on greenwashing and aiming to enhance transparency, which many changes coming into play in 2023.
While we remain cautious about the macroeconomic outlook for 2023, the past year has shown that in times of stress, the sustainable investment industry showed itself to be as innovative as ever, bringing new products and solutions to the market.
At EQ we continue to be dedicated to mainstreaming sustainable investing in this ever-changing world, where sustainability impacts are becoming more material by the day. We anticipate a lot more innovation in the next year; through this EQ will maintain the high sustainability objectives of its portfolio range, while also meeting return objectives.
In conclusion
For those of us focused on sustainability in the investment industry, the last few years have felt incredibly busy – this won’t change in 2023!
We will continue to help our clients navigate the evolving landscape and work with companies looking to be sustainability leaders.