October 2020
M&G I NVESTM E NTS
SUSTAINABILITY THEMES TOO
IMPORTANT TO IGNORE
Ben Constable-Maxwell, Head of Sustainable and Impact Investing at M&G Investments
2019 was a pivotal year in the journey towards a more sustainable future. The recent wave of public attention generated by the nature documentary series ‘Blue Planet II’ has helped to create a backlash against single-use plastics. Sustainability issues have made front-page news courtesy of environmental movement Extinction Rebellion and Swedish teenage climate activist Greta Thunberg, among others. Yet 2019 saw the highest carbon emissions on record, and there remains global discord on the action needed to combat climate change. I am far from alone in believing that solving sustainability challenges will be era-defining for the world’s companies. Most, if not all, sectors need to adapt in order to continue to thrive. As we look ahead to 2021, here are three sustainability themes that investors ignore at their potential cost. 1. MOVING TOWARDS A CIRCULAR ECONOMY Not only are many important resources finite, but their extraction and single use can have costly implications for the environment. An alternative to the “take, make and dispose” economic model is moving to a more circular economy, where waste from production and consumption becomes a resource to be recycled, repaired and reused.
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This transformation will take more than a change in mindset. Durable goods must be designed so they can be repaired, not replaced, and global supply chains will have to be reimagined to enable the reuse and recycling of materials. Some companies and sectors, as in the packaging industry, have already made great progress towards closed-loop processes. Ultimately, transforming waste into a resource should not only address major sustainability concerns, but could also unlock greater value for businesses and their investors. 2. SOLVING ENVIRONMENTAL CHALLENGES There is a persistent tension between fostering global economic development and reducing costs to the environment. After all, a rising population that consumes more as it grows richer heaps greater strain on the planet. For growth to be more sustainable, it is imperative to lower our carbon footprint. There are therefore powerful opportunities where companies can successfully develop solutions to environmental challenges while enabling the modern economy. These solutions do not need to be revolutionary – it is often the incremental innovations that can have the greatest impact. Technologies that make common processes more energyefficient, for instance, can have a significant effect.
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