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Contents 38 Invesco 40 Bites deep divesand 03 Editorial 08 The conjunction of 6 exponential crises 32 Integrating into the coresustainabilitybusiness 04 Foreword 16 The pivotal role of finance 06 Key messages 24 Challenges and opportunities for the financial sector
Clearly there is no “one-size-fits-all” panacea to the many demands that the issue of sustainability throws up, but discordant viewpoints can converge around a common thread: making sense of our actions and their social and economic utility as individuals and enterprises. As committed investors, we have observed that it is this quest for meaning that has succeeded in shifting investors’ sensibilities more than purely technical-financial These are investorsarguments.whoareno longer
It is a quest that takes us right to the heart of a vital challenge for a humanity whose most appreciable heritage lies in culture, social integration, biodiversity and the defence and exploitation of natural resources. The future of that heritage is in all our hands, and is our debt to the coming generations. Our commitment and hope is to bequeath them a more sustainable and fairer planet. In reality, not just a better planet, but the only one possible.
Giuliano D’Acunti Italy Country Head, Invesco
Editorial
In the pages that follow, we have sought to approach sustainability with a readiness to analyse and evaluate the global impact of our actions on society, companies, the planet and markets, in order to paint a clearer picture of an issue that is as complex as it is crucial to all our futures.
Addressing the issue of sustainability in such uncertain times is a challenge that extends down into every area of human endeavour. And when we reach up to peek beyond our own sector, our own markets and our own actions, a lowest common denominator emerges: sustainability is above all a paradigm shift. It is this starting point, a constantly shifting context and profound awareness of our fragilities as individuals, companies, institutions and communities, that forms the basis for the work described in this report.
But by and large, genuine vision and approach have largely not translated into rigour. This shortfall is evident in the new milieu surrounding us and the vexing scenarios looming on the horizon, vulnerable as they are to the fragilities that the public health crisis and economic and social shocks have laid bare.
Sustainability should be a spirited word, used resolutely and proudly. Why? Because it encapsulates a vision, as simple as it is noble, of the principle of conservation of the planet’s resources, from the environment to human talent, from preserving biodiversity to combating inequality. In recent times the word “sustainability” has gained ground in public discourse, as exogenous and endogenous pressures drive the business world, institutions and civil society to sharpen their focus on questions
content with narratives centred on lofty but perhaps incomprehensible financial metrics, and who instead look to a vision of the future on which they can pin their hopes and ambitions.
However, in order to successfully develop and implement solutions that enable the integration of sustainability into the core business, it has become essential to come to terms with complexity and uncertainty, as this concept is naturally embedded with a constitutive multidimensionality and the frequency of sudden changes occurring in current global scenarios is rapidly increasing.
Since production of original data was beyond the scope of work, the paper benefits from a wide pool of academic and publicly available sources, gathered both on a national and international level. Information was collected until July the 8th 2022. Therefore, limitations connected to the current uncertainty in the global context and rapidly changing scenarios should be taken into consideration.
The House-AmbrosettiEuropean approach
This paper leads up to the event “Sustainability in uncertain scenarios” (September 28th, 2022), organized by Invesco Italy in partnership with The European House – Ambrosetti. This document was developed by The European House-Ambrosetti Sustainability Practice, and it is purposed to offer a high-level synthesis on a broad and complex, but often trivialized, topic such as the sustainable transition, with a focus on the key challenges, opportunities, and indications for the financial sector. As this transformation confronts each business with complex yet decisive choices, identifying appropriate leverages to address the complexity challenge becomes in fact a priority.
For sustainability to become a business lever, societal and market transformation should be anticipated. This approach may reorient the operational ways of implementing a wide range of sustainability tools, from strategic planning to reporting and stakeholder engagement.
In the face of this challenge, it is critical to focus on developing an overall, longterm view, detecting and decoding global trends and policies which may impact the business model in order to identify the most urgent challenges.
Significant changes on the market are a reflection of transformations that shape society. Usually, companies tend to monitor the market in a very sophisticated way, but they do not seem to be examining societal changes with the same attention, causing potential slowdowns in response time to transformations.
Foreword
Challenge ‘A’ Challenge ‘B’
Society Environment Economy Geopolitics
analysis of scenarios, trends and impacts on business
Impact area Impact area Impact area Impact area
Technology
Impact area
Impact area Impact area Impact area Impact area
Business model
Impact area
Global Trends & Policies
Model
The actual economic system operates well past the planet limits. Natural resources are consumed at unprecedented levels. Since 1972, the Club of Rome has been highlighting how, if development patterns remained unvaried, population growth would decline by 2030.
Global geopolitical tension arises in an increasingly multipolar world. In front of growing geopolitical tensions, most recently featured by a close conflict and continuous tensions between superpowers, the EU faces key internal challenges related to the velocity of its internal governance processes.
The market, the environment and society have made clear that sustainability is no longer an option. In this scenario, though the costs of ecological transition are high, opportunities seem to be consistent. Therefore, institutions at the global level are increasing regulatory pressures to enhance transparency and accountability. Finance is the ultimate ally entrusted with achieving such transition.
Key messages
Global growth is experiencing a significant slowdown. In addition to the pandemic, states must now face additional economic disruptions driven by inflation pressures and commodity crises which continue to bring up global debts to skyrocketing levels.
There is no going green without going blue. Technology plays a key enabling function towards a sustainable transition. Renewable energy generation costs have already fallen more than 89% in 10 years but the contribution of disruptive 4.0 technologies is still crucial to reach climate neutrality.
They’ll believe heat when they see it Public consensus on the link between human activities and climate change is increasing. Yet, whilst most citizens agree that the climate is changing, they believe that this will not produce very significant changes to their lives.
Financial pressure arises in a “scrambled ESGs” scenario. Strong growth is expected to take sustainable investments from $35.3 trillion in 2020 to more than $50 trillion by 2025, yet barriers to ESG adoption exist, as data to navigate such an overcrowded world are lacking and non-financial ratings produce highly diversified results depending on the methodology adopted.
AdobeStock.source:Image
Great ambitions come with great calls to action for the financial sector. Achieving climate goals is no longer optional with 91% of the world’s GDP being dependent on net-zero emissions by 2060. Finance plays a key role in diverting capital flows and investments towards sustainable initiatives in support of such global climate goals.
Sustainability is going viral, as is the greenwashing virus. While sustainability keeps growing on consumers and investors as it is commonly associated with higher return on investments, the risk of greenwashing seems to be always just around the corner.
pushed healthcare systems to the brink of collapse and is still. Although science proved triumphant in developing a vaccine in a short span of time, predictions state that the likelihood of humans to be living through a pandemic in their lifetime amounts to 38%.
In over 60 countries a significant decline has been recorded over the past 16 years and, nowadays, over 2 citizens out of 3 live under an authoritarian regime.
Democracy is rapidly declining worldwide
As social inequalities increase, their impact becomes clearer, also on the environment The richest 10% of the population emits 6 times more than the poorest 50%. Meanwhile, inequality continues to grow with the richest 1% detaining more wealth than the Theremaining 99%.pandemichas
The current uncertainty is marked by the conjunction of 6 exponential crises: the geopolitical crisis, the economic, the increased pressure on natural resources, and healthcare crises, the growing rate of inequalities and finally the fall of democracy. These are set to reshape the world and require the development of appropriate systemic response strategies.
Thecrisesconjunctionof6exponential
08
1. The geopolitical crisis 10 2. The economic shock 11 3. The pressure on natural resources 12 4. The growing inequalities 13 5. The healthcare crisis 14 6. The fall of democracy 15
AdobeStock.source:Image
complexes
Against this backdrop and despite a looming political equilibrium uncertainty, Turkey is assuming the role of mediator
world’s
declared being favourable to Taiwan’s independence, showing an ambiguous position on the matter, influence over Pacific islands is a pivotal element in its competition with China. Further to this, during the recent NATO Summit which took place between the 28th – 30th June, the U.S. saw the opportunity alongside the other G7 countries to launch the Partnership for Global Infrastructure and Investment (PGII), with a $600 billion investment, to continue strengthening their presence in the Pacific and compete with the Belt and Road Initiative that has China at its helm.3
The Ukraine-Russia conflict, growing tensions between the western world, Russia and China, Turkey’s ambitions and Europe governance increasingly faltering are putting globalization under an unprecedented strain and simultaneously highlighting an increasingly evident multipolarity. The presence of multiple power centres split across global (great powers) and regional (middle powers) ones hampers the viability of global governance tools needed to encounter issues such as climate change, migrations and wars.
The geopolitical crisis
An increasingly fragile and fragmented geopolitical framework, dominated by growing tensions between superpowers, poses considerable internal challenges for the EU. As its governance model is characterized by a constellation of sovereign states with different economic and geopolitical ties, the lack of cohesion represents a main threat when it comes to response and implementation speed.
Consequently, actual geopolitical tensions, coupled with the pandemic effects, protectionism and supply chain disruptions, are generating evident impacts on global cohesion and trade.
In parallel, on the other side of the globe, the polarization between U.S. and China is continuing to grow. Whereas the U.S. is concerned by Beijing’s assertiveness in the region and the progressive modernization of its military, China is resenting what it considers an increasing isolationist approach waged by the U.S. The Taiwan crisis is just the latest of the skirmishes between the two countries, further undermining the already low levels of mutual trust. Against Beijing territorial and sovereign claims of the island, the U.S. renewed its previous positions stating that it would be involved militarily if China was to attack Taiwan. Whilst the current U.S. administration has not openly
The regional security re-envisioned to account for contemporary
In front of these global challenges, Europe faces a stalemate risk
middle powers Great AnglosphereMiddlesPowersPowers ConflictInsulatorsZone Source: The Institute for Peace & Diplomacy, 2022. AmericanNorthRSC AmericanSouthRSC SouthAsianRSC AsianMiddleRSC AfricanSouthAsianWestRSCRSC Southeast proto-complexAsiaproto-complexHorn EuropeanRSC SehelianRSC Southconflict-zoneCaucasus Post-SovietRSC China ChineseRSC PacificRSC SupercomplexAsian USA Russia
committed to preventing a global food crisis. Since Russia and Ukraine cover almost 30% of all Global wheat exports, Ankara facilitated the stipulation of an agreement to allow the departure of cargo ships of between 20 and 25 million tonnes of grain stuck in Ukrainian mined ports, which Turkish and NATO navy would then escort to neutral waters and towards the Mediterranean.2
1.
Such an already fragile situation has been aggravated by Russia’s invasion of Ukraine on the 24th of February, which sparked a war with no signs of halting yet. From its inception, this conflict has been altering geopolitical balances by straining U.S.-Russia relations, strengthening the rapport between the Russia and China axis, and increasing the risk of a wider European conflict. The invasion has, in fact, also prompted once neutral European states as Sweden and Finland to submit applications to join the transatlantic military alliance, driven by security concerns due to the proximity to Russia, additionally igniting negative ripple effects on global commodity and financial markets stability.1
2.
Furthermore, since such commodity inputs are upstream in many global value chains, higher costs are hampering and disrupting a wide range of industries such as food and beverage, petrochemicals, transport and construction.4
In front of these challenges, in 2021 major economies such as U.S., China and the EU have adopted different instruments and procedures, with dissimilar response times.
Yet, faster in the design phase, at the time of implementation and disbursement of resources the EU has been then overtaken by the other superpowers, due to the complex structure and governance of its decision-making bodies.
Source: World Bank, Commodity Market Outlook, 2022. Commodity price developments Commodity price changes in 2022 (%) Energy price growth (%) Fertilizer price growth (%) Food price growth (%) Potassium chlorideCoal Wheat, USNickelSRW Natural gas, Wheat,SoybeanEuropeBrentDAPoilPalmoilUSHRWLNG,JapanMaize 154.5 21.322.829.932.133.234.135.150.051.760.574.7 -20060080040020001970 1978 1986 1994 2002 2010 2018 -20060040020001970 1978 1986 1994 2002 2010 2018 -100200100015050-501970 1978 1986 1994 2002 2010 2018
Global tension and economy disruptions have ultimately led to a spillover through commodity markets, causing global prices to soar, especially for oil, natural gas, and wheat. Such sharp increase in prices is adding to the inflation pressure, which has more than doubled over the last year, and is leading to expectations of monetary policies tightening around the world. The economic shock
In 2021, global debt surpassed $303 trillion reaching $305 trillion in the first quarter of 2022 5 This unprecedented ratio of public borrowing and liquidity injections stemmed from the need of raising enough economic resources to sustain the postCovid recovery and encounter the energy crisis and inflation pressures.
The U.S. planned economic aid of about $2.3 trillion, equivalent to 11% of the country’s GDP. The funds’ agreement was signed on 27 March 2020 and the first stimulus check was released on 17 April 2020. China has distributed €670 billion under the form of economic aid in 2020 alone (equivalent to 5% of GDP).6 Also the European Commission, through the NextGenerationEU recovery plan approved in July 2020, allocated around €1,050 billion (equivalent to around 6% of the cumulated GDP of the entire Union) to be distributed to the Member States between July 2021 and December 2026 – €300 billions of which were later allocated through the so-called REPowerEU 2022 plan to respond to the energy crisis and cease Europe’s dependence on Russian gas exports.7
In this context, global growth is expected to slow down from 5.7% in 2021 to 2.9% in 2022, significantly lower than the 4.1% anticipated in January. As a result of the damage from the pandemic and the war, per capita income levels in developing economies this year will be nearly 5% below its pre-pandemic trend.8 The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hampering growth and recession will be hard to avoid for many countries.
3.
Limits to Growth
The outcome of such analysis culminated in the “Limits to Growth Report” which showed alarming results: if the rate of population growth, industrialization, food production and resource exploitation remained unchanged, a global development decline would have been reached within 100 years.
Source: The 30-Year Update, 2004.
Latest emissions data are just one example of how no significant slowdown in terms of global heritage exploitation has been achieved yet. Humans are consuming natural resources at an unprecedented speed: this year alone, 2022, the Earth Overshoot Day, the date in which humanity will have used all the biological resources that planet earth is able to regenerate throughout the entire year, landed on the 28th of July,10 almost 2 months earlier than 20 years ago.
2050 21002010197019501900
The report underwent several updates, one was issued in 2004 and named “Limits to Growth: The 30-Year Update”, which set 2030 as the date in which population growth would curb due to the increasing anthropic footprint on natural ecosystems and “Limits and Beyond: 50 years on from The Limits to Growth”, issued in May 2022, which confirms the previous results and underlines the urgency to act in order to avoid catastrophic consequences.
of the Century.12 Despite these predictions, pledges agreed to at the COP26 held in Glasgow could still set humanity up for success: if national targets are fully met from now onwards, this could curb the rise in temperatures to 1.8°C.13
Yet nowadays biodiversity loss ranks amongst the top global risks to society. The World Bank predicts that the collapse of ecosystem services such as crop pollination, marine fisheries and timber supply would lead to a steep decline of $2.7 trillion (-2.3% per year) in Global GDP by 2030. For the EU alone, losses are estimated at €93 billion.14
Hence, due to its exposure, the financial sector may play a crucial role in biodiversity preservation by orienting capitals towards environmentally positive initiatives. Therefore, over the past decade, more than 11 financial institutions globally and central banks of several countries have adopted norms and regulations focusing on biodiversity, demanding risk assessments and impacts analysis of investments or portfolios.
Non-renewable resources remaining Food per Populationcapita Services per capita Industrial output per capita Global pollution 2030 Population declines following economic collapse
This trend has been clear for 50 years now Already in 1972, in fact, the Club of Rome commissioned a group of researchers from the Massachusetts Institute of Technology (MIT) to study the prospects of global development based on the availability of resources and earth’s environmental conditions.
Historical trend 1900–1970 Observed trend 1970–2010 Trend predicted by 1972 study The pressure on natural resources
Due to the pandemic and the strict confinement measures being adopted to contain it, 2020 witnessed a reduction in global CO2 emissions of 7% compared to 2019 levels. Nevertheless, this cannot be considered a success, as the temporary effects were insufficient to meet the environmental targets set by the 2015 Paris Agreement and in 2021 greenhouse gas emissions increased by nearly 2.1 Gt over 2020 levels – the largest annual increase in energy-related CO2 emissions since 2010.9
Recently, proofs were gathered that manmade greenhouse gas (GHG) emissions produced over the past 170 years have led to an increase in temperatures of +1.1°C compared to pre-industrial levels 11
Such an increase has given rise to climate-related disruptions ranging from droughts to floods and extreme heat, seriously threatening livelihoods and the biodiversity globally. In this scenario, the Intergovernmental Panel on Climate Change’s (IPCC) also alerted that current States’ policies are still insufficient to maintain global temperatures under the 1.5°C threshold and on this trajectory, temperatures will reach 2.7°C by the end
4.
Simultaneously, the latest “World Inequality Report” highlighted a clear causal link between social inequality within countries and CO2 emission levels. In Europe, the poorest 50% of the population emits about 5 tons of CO2 per person per year, the richest 10% emits 29 tons. The poorest 50% of the population in rich countries has already reached (or is approaching) the 2030 climate goals, if expressed on a per capita basis, while the richest is far from it: climate policies are disproportionately affecting the poorest while leaving the consumption habits of the wealthiest unchanged,19 in a scenario where the access to capitals on the market is still limited by fiscal constraints, higher borrowing costs and less ESG information for developing societies.20
According to the report “The Inequality Virus”, only 9 months (between March and November 2020) were sufficient to restore the wealth of 1,000 of the richest billionaires to pre-pandemic levels, much less that the estimated 10 years needed to the poorest portion of the global population to reach the same result.17 During the pandemic, the wealth of the 10 richest men has doubled, while the incomes of 99% of humanity are worse off, because of COVID-19. In other words, nowadays, the 10 richest individuals in the world own more than the bottom 3.1 billion people and the wealth accumulated by the former since COVID19 would be sufficient to lift the whole population out of poverty.18
The International Monetary Fund (IMF) estimates that over the past three decades, 53% of countries have witnessed an increase in income inequality and this holds true for both G7 countries and developed economies. The pandemic has heightened this phenomenon: for the first time in a century, in 2020 economic disparities have simultaneously grown across the globe 16
In 2016, the richest 1% of the world’s population held more wealth than the remaining 99%15 – an imbalance that, according to Oxfam experts, would not only hinder economic development in the medium-term, but also increase the risk of social conflict.
Tons of CO2 per capita/year Source: World Inequality Report, 2022. Bottom 50% Middle 40% Top 10% Europe North America South & South-East Asia 8070 East Asia 6050403020100 3.1 5.1 10.6 29.2 9.7 21.7 73.0 1.0 2.5 10.6 7.9 38.9
The growing inequalities
The probability of experiencing a pandemic similar to COVID-19 increases by 2% each year, meaning that an individual born in the 2020s bears 38% chance of living through one.21
Source: Johns Hopkins University CSSE COVID-19 Data, 2022. 1 20Mar 2,0003,5002,5001,5001,0005000 8 20Aug 2421Feb 12 21Sep 522Jul 3,000
From the outset in fact, the number of infections grew disproportionately to such an extent that in order to avoid the rapid decline of healthcare structures, states soon realised that it was essential to develop containment measures to ‘lower the curve’ of contagion, easing the pressure on hospitals to enable them to better manage the high numbers of infected people.
Nowadays and notwithstanding the measures so far taken, humanity continues to face the risk of new COVID-19 waves that are increasing in frequency. The latest
The pandemic is therefore contributing to a radical rethinking of healthcare systems, leading States to considerably increase healthcare expenditures as a percentage of national GDP such as the United Kingdom (+2.6%), Germany (+0.9%) and Italy (+1.0%).22
epidemiological update issued on the 29th of June 2022 by the World Health Organization (WHO) confirms a steady increase in cases, even considering the lower number of tests carried out given countries are changing their testing strategies. The surge in cases make is clear that humanity won’t be able to eradicate the virus so easily but rather that measures to coexist with it are required.
With more than 552 million confirmed cases globally and more than 6.34 million victims, the health crisis triggered by COVID-19 generated an unprecedented impact on the healthcare systems of most countries, pushing them to the brink of collapse in a short period of time.
Such resources have been instrumental for the achievement of previously unthinkable scientific goals: in less than a year, more than 200 potential vaccines
have been developed. The outbreak of the pandemic in fact required extraordinary efforts on the research front, both revealing the importance of reaching consensus and equality to ensure effective solutions within specific timelines. Notwithstanding the promptness shown by scientists, the level of distrust in research has grown exponentially, setting the foundation for social conflicts linked to fears towards lockdown measures and mass vaccinations.23 On the other hand, protests related to fair access to patents on coronavirus vaccines also raised, supported by more than 100 countries at the global level and prompted the members of WTO Ministerial Conference to waive intellectual property obligations until 2027 for developing countries to produce their vaccines.24
Daily new confirmed COVID-19 cases
United Arab Emirates United Kingdom The healthcare crisis
5.
EuropeanItaly Union United States
Whereas democracy has not enjoyed robust health for some time, spurred by increasingly technocratic societal approaches and a tendency to resort to coercion, during the last three years its resilience was further put under pressure by both exogenous and endogenous challenges. In the U.S. only, more than 80% of the people think that the decisionmaking system needs “major changes” or “complete reform” with roughly 40% of the politically active saying that members of the other tribe are evil and 60% believing they are a threat to the Country.26
Only in the last year, as the U.S. withdrew their troops from Afghanistan, the Taliban supplanted the elected government in Kabul establishing an authoritarian, anti-pluralistic, and inequal regime. In Africa, Sudan’s generals seized power, reversing the results of the 2019 ouster of former dictator Omar al-Bashir. In Latin America, Nicaragua’s incumbent president won a new term in a tightly orchestrated election after his security forces arrested opposition candidates and deregistered civil society organizations. Simultaneously, democracies were harmed from within by illiberal forces, as the U.S. Capitol Hills siege held by rioters on the 6th of January to overturn the results of the presidential
Source: Economist Intelligence Unit, 2022.
Democracy is rapidly declining worldwide. According to the latest data on over 160 countries, last year global average democratic levels reached a new low, experiencing a drop only equivalent to that recorded in 2021 with the financial crisis.
election eloquently showed. Brazil to India have also taken or threatened a variety of antidemocratic actions, and the resulting breakdown in shared values among democracies has led to a weakening of these values on the international stage.
Democracy Index 9th of February 2022 update
This already critical scenario has been further mined by the geopolitical disruption which took place in Ukraine and promises to reshape Eurasian boarders and equilibria. In what is being referred to as “the third wave of autocratization” by scholars, the Russian war against Ukraine may be a game changer.
In this scenario, after a significant deterioration in the first year of the pandemic driven especially by governmentimposed intrusive and restrictive measures, authoritarianism kept spreading in 2021
A global power’s military invasion of a democracy is a public demonstration that autocracies may represent a tangible threat to peace and that it is therefore increasingly urgent to commit to a strategic change from democracy support to democracy protection 28
Nowadays, more than 1 citizen out of 3 lives under authoritarian rule while just 6.4% enjoy a full democracy.25
6.
democraciesFulldemocraciesFlawedregimesHybridAuthoritarianregimes The fall of democracy
and in the first quarter of 2022, bringing to 60 the number of countries across all the world’s regions where a significant decline in levels of democracy has been recorded over the past 16 years 27
The pivotal of financerole
16
The third era of sustainability integration into core business 18 The cost of unleashing the transition 19 Beyond transparency: the European path 20 Finance as a key driver of the European ecological transition 22 Sustainability has become a foundational pillar of business in a historical moment which requires international institutions and finance to act as key drivers of change, promoting the evolution of economic systems, governing bodies and behaviours globally.
AdobeStock.source:Image
Today, sustainability is beginning to be conceived as a foundational value for companies, whose authority is based on their ability to transparently provide the necessary information to consumers, consolidating credibility and overcoming the stage of greenwashing. The consumer, therefore, gains a leading position in the transition towards sustainability by adopting more virtuous consumption styles.
The concept of sustainability, as well as companies’ approach to it, has evolved over time, responding to the thrusts of the sociopolitical context.
This evolution was driven by the policies and instruments that, since the 1970s, have been put in place globally to promote sustainable development and may be schematized into 3 phases – 3 distinct eras of sustainability, each very different from the other in both rationale as well as value terms and marked by specific strengths and weaknesses.
The 3 eras of sustainability Source: The European House – Ambrosetti, 2020. Command and Control (until the years ’70) Voluntary tools (until the years ’90) Performance (until the year 2020) ComplianceorPenalty Compliance with guidelines or certify +/– requirements Consumer on standard datachoice Cost of control and inability to manage complexity Greenwashing “collector’s syndrome”and Credibility and effectivenessof thresholds Business ethics Ethics of responsibility,shared value Sustainability as a value of societycore Same for everyone Laboratory of experienceexperimentationgreatandgenerator greenwashingOvercomingValueWeaknessStrengthRationale
The third era of sustainability integration into core business
Image source: AdobeStock.
The most recent era, the performance era, featured the last decade only, and represents a huge step forward in the process of integrating sustainability into businesses.
As a matter of fact, the OECD estimates that, in order to have at least a 66% probability to contain global warming below the 2°C threshold, investments of more than $103.5 trillion will be required over the 2016-2030 period,29 with climate investments increasing by around 590% annually compared to current figures.30
Energy will play a crucial role, with latest estimates highlighting how over $50 trillion investments will be needed to reach the carbon neutrality by 2050,31 and how these could add more than 20 million jobs and 4% to global GDP already by 2030 32
To tackle this challenge, global institutions at the international level are increasing regulatory pressure on sustainability, partly as a response to global crises that require ever faster changes.
The
As a result, in the last decade there has been a proliferation of regulatory activities related to climate change, driven especially by the European Union, with nearly 400 topic-related acts being approved in 10 years,33 and mainly focused on the financial sector 34
cost of unleashing the transition Source: The European House – Ambrosetti elaboration on DataMaran (2021). 120 Transport 10080604020 Wastewaterand Telco transmissionEnergy supplyEnergychain demandEnergyandefficiency 2016Total–2030 40.5 9.0 15.0 9.0 16.5 103.5 13.5 Sum0 of regulatory acts 450 ’18 400350300250200150100500 ’20’16’14’12’10 ’19’17’15’13’11 ’20 200150100500 ’21’19’18’17’16’15’14’13’12’11’10 Investment gap to contain temperature rise below +2°C trillion $, 2016-2030 Increasing regulatory activity on climate change on a geographic level Distribution of Climate Change Regulation by sectors Source: The European House – Ambrosetti elaboration on Datamaran (2021). Source: The European House – Ambrosetti on HSBC e OECD data (2020). Financial IndustrialsServices Consumer Goods and Services Utilities USA International UE
Although progress has been made, a great effort is still needed to enable a full implementation of international goals and ambitions regarding the sustainable transition, both on the legislative and financial ground.
The approval was finally reached two weeks later, enforced by an agreement on the extension of carbon pricing to waste incineration and on a wider scope of the shipping sector. But on the overall level of emissions cuts, the Parliament settled for a modest increase — despite its repeated calls for more ambitious targets. At the start of its term, it had declared a climate emergency, and later demanded EU emissions cuts of 60% by 2030 rather than 55%.37
However, these tools can only be properly activated if the availability of financial instruments is granted without leaving anyone behind. Yet, in the recent scenario, such necessity has been threatened by the uncertainty linked to some of the key climate proposal of the European Parliament’s Fit For 55 program. On the 8th of June 2022, out of the 8 proposed laws, only 5 received the green light.
To reach such ambitions, the European Commission (EC) has identified 3 concrete courses of action with the aim of directing investments towards the green and digital transition and, by doing so, nurturing a virtuous triangle:36 companies will be equipped with tools to report their sustainability performance in a clear way to customers and investors in order to attract capitals on the market (Corporate Sustainability Reporting Directive, or CSRD); financial institutions will be required to make disclosures on the sustainability performance of their portfolios (Sustainable Finance Disclosure Regulation, or SFDR); investors will have tools to easily identify truly sustainable economic activities based on pre-established (Taxonomy for SustainablecriteriaFinance).
The European Union aims at positioning itself as a leader in the sustainable transition by becoming the first climate-neutral continent by 2050.
Beyond transparency: the European path
The reform of the Emissions Trading Scheme (ETS) and the two related proposals – the Social Climate Fund and the Carbon Boarder Adjustment Mechanism – was referred as it was considered not ambitious enough
The surge in climate-related regulatory acts saw a major explosion in 2019 with the Green Deal, a €1 trillion-plus reform and investment program geared toward developing a modern, resourceefficient economy. These commitments have been reaffirmed over time by additional interventions such as the NextGenerationEU, a temporary tool for post-pandemic economic recovery, and the latest Fit for 55 climate package that sets an interim emissions reduction target of -55% by 2030.35
Source: by The – Ambrosetti on Alliance for Corporate Transparency
data (2021).
Banks, investors and insurance companies Company andTransparencyaccountabilityBeneficiaries
European House
Strategy
Sustainable Disclosure RegulationFinance Taxonomy on sustainable finance Non Financial Reporting Directive (CSRD) + Sustainable Corporate Governance Green Deal Sustainable Finance Strategy
and
€500 billion per year additional(investments,(dataReportinginvestmentsandstrategy)Capitalsloans,insurance)
Re-elaboration
Risks opportunitiesand
The
for impactsResponsibility Impacts
European framework for sustainable transition
(monitoringDataGovernanceboard,targets,businessmodel)
People planet
Aside from the Extended Environmental Taxonomy, in February 2022, the Platform on Sustainable Finance which aims to provide a classification of economic activities that contribute to social goals which are only featured in the broader taxonomy framework under the minimum social safeguards. Addressed at financial and non-financial undertakings it focuses on three main stakeholder groups businesses bear a direct impact on, namely employees, customers and communities. The suggested structure of the social taxonomy has 4 key elements in common with that of the environmental taxonomy (i) the development of social objectives; (ii) adoption of the substantial contribution principle and (iii) ‘do no significant harm’ (DNSH) criteria; and (iv) inclusion of minimum safeguards. However, it deviates from the environmental taxonomy by containing sub-objectives which spell out different aspects of the 3 social objectives: decent work, adequate living standards and well-being for end-users, and inclusive and sustainable communities and societies.39
On March 8th, 2018, the EC published a Sustainable Finance Action Plan with which it aims to redirect capital flows towards sustainable investments to achieve its Green Deal’s ambitions. The European Union hence immediately attributed a pivotal role to the finance sector, namely, to ignite and fuel the sustainable transition.
To date, the Taxonomy has defined activities and technical criteria for only the first 2 objectives: climate change mitigation and adaptation. On the other 4 environmental goals, proposals were issued and recommended by the Sustainable Finance Platform, with the Environmental Delegated Act expected to be published by the EC towards the end of 2022.
This continuously evolving process, on the medium term, will also lead to the development of an Extended and Social Taxonomy. The ultimate aim is to introduce greater transparency for investors by embedding all existing economic activities and map them according to a traffic-light system, where red represents activities with an unsustainable performance requiring an urgent transition or exit to avoid significant harm, amber the activities that could qualify as part of an intermediate transition plan, and green for priority activities which are found to provide a substantial contribution. No colour is assigned instead to those activities which bear low environmental impacts.
The underlining rationale is founded upon policy or legal instruments such as the European Sustainable Finance Action Plan or the Paris Agreement which call upon a greening of the entire economy, acknowledging that different sectors and activities will have different starting points and transition potential.38
Though, to make this possible, the Commission deemed necessary to promote financial risks management, especially when derived from climate change, resource depletion, environmental degradation, and social issues, stimulating transparency and long-term vision in businesses.
Finance as a key driver of the European ecological transition
Source: Platform on Sustainable Finance, 2022. The Extended Taxonomy visualized Unsustainable Sustainable if performance keeps improving Green and Sustainable Urgent exit needed away from Significant Harm Urgent needed awaytransitionfrom Significant Harm AmberIntermediate/performance(transition to greenwhen possible) ContributionSubstantial Low environmental impact (greening through green expenditures)
The Sustainable Finance Action Plan’s first implementation step consisted in developing a Sustainable Investment Taxonomy – a dictionary in which economic activities are catalogued based on their ability to contribute to the achievement of at least 1 out of 6 environmental objectives (1. climate change mitigation; 2. climate change adaptation; 3. sustainable use and protection of water and marine resources; 4. transition to a circular economy; 5. pollution prevention and control 6; protection and restoration of biodiversity and ecosystems), without significantly harming the other 5 objectives as well as respecting the screening criteria defined for each of them and minimum social safeguards.
The European legislative landscape on Sustainable Finance
EU Strategy for financing the transition to a sustainable economy
Proposed Revision of the ReportingNon-FinancialDirective
Updating of the 2018 Action Plan into a new European strategy aimed at financially supporting a sustainable transition
10/03/21
Roadmap to guide the financial industry’s transition
22/06/20
Harmonized regulation on disclosure relating to the integration of ESG risks in investment management 21/04/21
Identifies sectors, activities and technical criteria for the first two climate objectives of the Taxonomy namely, Mitigation and Adaptation01/12/22
11/12/19
NextGenerationEU
Disclosure RegulationSustainable Finance
New regulation for more reliable and comparable reporting of non-financial information06/07/21
Climate Delegated Act
Action Plan for Sustainable Finance
European Commission mandated program that aims to mobilze €1 trillion over 10 years
Source: Re-elaboration by The European House – Ambrosetti (2022).
08/03/18
Single classification system to define environmentally sustainable economic activities
22/07/20
01/01/22
Economic recovery package to raise 750 billion euros for post-Covid revitalization
Taxonomy for a Sustainable Finance
Green Deal
CSRD’s implementation
Member States will have to implement the provisions to comply with the CSRD
Great ambitions come with great calls to action 26 for the financial sector Financial pressure arises in a “scrambled ESGs” scenario 27 Sustainability is going viral, as is the greenwashing virus 29 There is no going green without going blue 30 They’ll believe heat when they see it 31 for Challengessectorthe financialandopportunities
24
Embarking on a sustainable transition entails a radical and multi-dimensional transformation, involving each aspect of human life, from the societal to the individual sphere. Today, such change is already engaging both private and public sectors and affecting the evolution of economical systems, government bodies and individual behaviour at the global level. This presents challenges and opportunities that need to be seized.
AdobeStock.source:Image
The average global temperature will increase by more than 2.5°C if net emissions are not reduced to zero by 2100, but even if action is taken, it is predicted that it will not be possible to contain global warming below +1.8°C.40
Global net zero coverage PopulationEmissions(PPP)
The perception of climate change as a real risk has proved increasingly strong over the past decade. Already with the Paris Agreement, the international community gathered with a view to strengthening the global response to the threat of climate change by containing the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.41
Source: Energy & Climate Intelligence Unit, 2022. GDP
80%83%91%
While institutions are working to ensure broad coverage at the regulatory level to achieve climate goals, more has yet to be done on the investments side: the financial sector may play a key role in diverting capital flows and investments towards initiatives that can support the achievement of global climate targets
Such commitments were again tackled during the Conference of the Parties 26 (COP26), where amongst other initiatives, 197 countries signed the Glasgow Climate Pact declaring their intention to limit the rise in global temperatures to below 1.5°C 42
Great ambitions come with great calls to action for the financial sector
Following major global zero-emission commitments by Europe, the U.S., and China, the private sector also presented significant ambitions, with 2,000 large companies committing to achieve zero emissions by 2050.43 Therefore, today, about 91% of the world’s GDP is constrained to achieving climate neutrality by 2060 44
Against this backdrop, the growing attention given to ESG investments on the financial market does not seem to depend solely on the ethical vocation of investors. On the contrary, it has become increasingly evident over the years that there is a positive correlation between ESG performance of financial securities and economic returns. Short-term returns are not the only appealing feature of ESG stocks, investors are also driven by the desire to improve performance in the long run and strongly lean towards active investment funds to integrate ESG factors in their portfolio.47 Notwithstanding ESG stocks have performed better than the less sustainable ones over the past years, the Ukraine conflict seems to put sustainable investing on the backfoot, as energy security has taken centre stage over carbon intensity in investors priority interests
The share of sustainable investments grew steadily in Canada, the U.S. and Japan. In contrast, Australia and Europe saw a slight contraction from 2018-2020 levels, probably due to the narrowing of the criteria used to define ‘sustainable’ investments. During this two-year period, the U.S. and EU continued to account for more than 80% of global sustainable investment volumes, while the proportion of Canadian (7%), Japanese (8%) and Australasian (3%) assets remained almost unvaried.
In the first quarter of 2022, boosted by the rise of gas prices recorded in Europe, markets shifted their focus on the traditional oil & gas sector. A significant slowdown in ESG equity funds inflows has consequently taken place: from the $24.4 billion recorded in February to the $9.4 billion of March, with an almost sixfold monthly drop compared to the market average (-60% for ESG equity funds vs. -13% for the whole compartment).48
Financial pressure arises in a “scrambled ESGs” scenario
However, it is not always easy to navigate the overcrowded world of ESGs, as they have to cope with difficulties in accessing quality data and inconsistent ratings. The main barriers for ESG adoption, for both institutional and wholesale investors, relate to the lack of solid data, as a cause and consequence of a complex regulatory framework and fears linked to greenwashing, followed closely ESGby yield limitation.ratingsplayakey role. They try to support investors in identifying the “most sustainable companies” and in monitoring their ESG performances. However, the methodologies behind non-financial ratings are very different and can result in the same company receiving widely divergent ratings. Often, even companies in controversial industries manage to rank high in sustainability rankings because the evaluation criteria are mostly based on organizational characteristics rather than the business model.49
At the beginning of 2020, global sustainable investments reached $35.3 trillion, increasing by 15% in the past couple of years (2018-2020) and by 55% over the last four (2016-2020), with growth predictions amounting to $41 trillion in 2022 and surpassing $50 trillion by 2025, spurred by fund inflows and climate change related concerns.45 Interestingly, this growth represents more than a third of the estimated $140.5 trillion of total assets under management (AUM).
The pressure put on companies by the financial sector might be seen as a challenge for the market at first but in the long-term will give rise to significant benefits in terms of sustainable transition acceleration. Examples of this pressure may be traced for example in the stipulation of the Net Zero Banking Initiative, launched in April 2021 and convened by the United Nations (UN), which brings together 93 banks from 39 countries representing over 43% of global banking assets, committed to aligning their lending and investment portfolios with net-zero emissions by 2050. Also, the Net Zero Asset Managers Initiative, launched in December 2020, is an international group of 220 asset managers with a total of $57 trillion in assets under management, portfolios totheorganizationsbyneeds:isThenet zero emissioncommitted to supportinggoalsby 2050.increasinginclinationtowardESGalsodirectlystimulatedbycustomeritisoftenthepressuresubmittedthesestakeholdersthatcausesglobalandinvestorsto increaselevelofcomplianceoftheirinvestmentsustainabilitycriteria.
While Europe has so far taken the lead on ESG assets, over the past two years it has been surpassed by the US whose appetite for ESG assets has grown by 40% now accounting for nearly half of the global $35 trillion.46
Source: Bloomberg Intelligence, 2022. 604020 2014 30507010 2016 2018 2020 2020 2022 2024 2026 2020 Actual vs. Projected 2022 – 2026 Projected ESG assets 2014 – 2018 Actual ESG assets800 ESG Global projected AUM by Country (Total AUM) CanadaJapanUnitedEuropeStates Australia / New Zealand Source: Reuters, 2022. 2018 -60120806040200-20 2019 2020 2021 2022 100-40 2017 Flows into ESG equity funds vs non-ESG equity funds ($ billions) ESG equity funds Non-ESG equity funds
change exposure of a company impacts my financial risk as an investor
investments risk and rewards Source: IBM Institute for Business Value, 2022. DisagreeNeutralAgree
The climate
All respondents
Personal investors Personal investors
ESG
Financial return on investment in environmentally sustainable companies will be higher than financial return in other companies over the next 5 years
12%24%64% 15%34%51% 11%24%65% 11%34%54%
According to a recent study conducted by the IBM Institute for Business Value, it was found that the pandemic considerably influenced the views on sustainability of 93% of global respondents. This trend intensified over the past year as amongst 16,000 global consumers surveyed in February 2022, 51% stated that environmental sustainability is more important to them than it was a year ago. In addition, over the last 12 months 49% of such consumers admitted having paid a premium for products bearing a sustainable or socially responsible label 50
Nowadays, the presence of social media continues to fuel sustainability, virality being the main source of information for eco-conscious consumers due to their accessibility. Yet, the downside is the risk of incurring in greenwashing practices: a sustainability façade used by companies for marketing purposes without being backed up by a truly significant sustainability performance.
It was also observed that 2 out of 3 personal investors deem climate as a significant factor impacting financial risk and that equally, the return on investment will be higher for companies that are environmentally sustainable. This year, 62% of personal investors consider that environmental sustainability is a crucial aspect in decision-making process, +14% 2021 levels.
Along with the transformation of financial markets, there has also been a rapid evolution of consumers’ behavioural patterns and consumption styles.
In this context, the generational factor also plays a decisive role. Millennials and Gen Z show the keenest interest in sustainable investing, with respectively 30% and 19% taking ESG factors into consideration in their investment decisions against only 16% of Gen X and 2% of baby boomers.51
All respondents
Sustainability is going viral, as is the greenwashing virus
Utility solar 2019
0.000.400.350.300.250.200.150.100.05 2020201820172016201520142013201220112010
scale
However, experts warn that should the actual context remain unvaried, a digital uprise could lead to a production of 19.95 Gt of CO2 above the actual levels (+550% with respect to 2020).53
Cheap
Source: Ramez Naam, 2020.
is
Whilst the opportunity to unlock the twin transition is vast, it could also represent a challenge if not seized effectively. In fact, according to recent projections, in the best-case scenario technology could help reduce 20% of global GHG emissions, the equivalent of 12,8 Gigatonnes (Gt) across sectors including energy (-1.8), transport (-3.6), agriculture (-2), manufacturing (-2.7).
There is no going green without going blue
price per kWh ($)
Solar’s Future Insanely
In the energy industry the effects of this “paired” transition are most tangible: the steadily decreasing cost of wind and solar energy is radically transforming the market. Only 10 years ago, wind power cost 22% more than coal, and solar even 223%. Today, barely a decade later, the price has fallen by more than 89%.52
What is surprising is not how much renewable energy prices have fallen, but how quickly they have done so This, once again, shows how technology plays a key enabling function towards an effective sustainable a few.InternetIntelligencetotechnologiesautomation.anrevolutiontowardsa digitalTechnologyapreviously underestimated,transition:itisnowkeyallyinmostsectors.infacthasalsosparkedrevolutionwhichhasnowmovedtheso-calledfourthindustrial(orIndustry4.0),featuredbyincreasedconnectivityandsmartExamplesofdisruptivewhosefullpotentialisyetbeexploitedrangefromArtificial(AI)toadvancedrobotics,ofThings(IoT)onlytomention
The success of the sustainable transition depends above all on the economic competitiveness of green products and services compared to their high-impact counterparts, and thus on the maturity of the “blue” technological solutions needed to produce and deliver them. Completing a twin transition (digital and ecological) is therefore essential.
Global (BNEF) Global (IEA) Global (IRENA) China (IRENA) USA NaamIEAIndia(Lazard)(IRENA)2010Forecast2011Forecast
Notwithstandingclimatethescientific consensus, further strengthened by the IPCC’s latest report, public agreement on the issue of climate change remains low. A recent survey conducted on over 12,000 of people across 6 European countries revealed that in people’s perceptions only 68% of scientists believe that humaninduced climate change is taking place and that around 4 people out of 10 still think that climate change is not harming their country in the short-term 55
It is causing harm right now Within the next 10 years Within the next few decades Don’t know
Public perceptions on climate change
An overwhelming majority of citizens agree that the climate is changing – the worst results are in the U.S. (83%) and the best in Germany (95%), while Italy stands at around 93%.54
However, while the attention shifts towards the local impacts brought about by climate change, many people appear still sceptical. In over 75% of the western countries in fact, most individuals expect their lives to be affected somewhat by change and that they will have to adapt to a changed
As a response to the low general opinion, an increasing emphasis on the need to ensure transparency and reporting requirements in order to steer investors toward reliable ESG investments is needed
They’ll believe heat when they see it
Source: King’s College London, 2022. 80604020 GermanyNorwayBritainIrelandPolandItaly 0 100
“When, if ever, do you think climate change will start to harm your country?”
40%
of people still think that climate change is not harming their country in the short-term
Within the next century In a century or more Never
A large proportion of citizens in fact believe that scientists are still divided on the causal link between human activities and rising temperatures – people who deny or underestimate human contribution to climate change, attribute it to natural processes. This indicates that there is considerable room for improvement when it comes to raising awareness on the scientific consensus on the anthropic impacts on climate change.
Different principle, different positioning 34 10 tips to embed sustainability into everyday activities 36
Companies can choose between different approaches to sustainability, but integrating sustainability into business means broadening the gaze toward future trends to be better prepared and less exposed to risks of disruption and instability. into the
Integratingbusinesscoresustainability 32
AdobeStock.source:Image
Companies interpret sustainability based on what drives them to turn their attention toward this issue. Specifically, different approaches can be defined based on how organizations conceive the relationship between business and sustainability and what principles underlie their strategic direction.
Different principle, different positioning
By looking at the matrix, it is possible to observe how companies’ position themselves with respect to sustainability and its evolution: as sensitivity to the issue increases, companies will move from left to right and from bottom to top.
Sustainability for business or business for sustainability Source: The European House – Ambrosetti. Business sustainabilityfor B4S CompetitivenessEfficiency > Positive impacts > Negative impacts Consensus Reputation Continuity Compliance Purpose S4B forSustainabilitybusiness
01 Develop a broad and long-term vision 02 Identify megatrends that3/4 affect your function/division 04 Identify what global leaders are doing to intercept trends 07 08 Estimate impactseconomic,environmental,andsocial Imagine concrete actions that can give legs to ambitions Considering the above, here below are 10 tips businesses can take into consideration when embedding sustainability into their everyday activities. 10 tips to embed sustainability into everyday activities
03 Collect baseline indicators related to megatrends 06 Determine the ambition you want to pursue 10 Imagine the organizational changes needed to implement the plan
Who we are
Invesco, with an asset under management of $1,449.0 billion (as of 31 July 2022), is one of the world’s leading independent asset managers. Clients appreciate its ambition to exceed expectations, a passion shared by more than 8,400 employees working around the world.
They trust Invesco because of its exclusive focus on investments, with no interest in activities that can compromise results, and because it makes diversity of thought a strong point: its 14 investment centers and different management teams are free to follow their own convictions. Invesco offers a wide range of actively managed investment funds and ETFs, and diverse strategies and investment styles.
Invesco
Our commitment to ESG productsthroughspecific ESGandwithinterventionresponsible13 professionalsforcreatingstrategiesESGapproachesmanagingclientsolutionscustomizedandportfolios.
Key Geographicfigures area (%) Source: Invesco, data as of 31 March 2022. USA 70 Asia 15 EMEA escl. UK 11 UK 4 By channel (%) Retail 67 Institutional 33 By asset type (%) Stock 50 Bond 21 Alternative tools 14 Money market 10 Balanced 5
Our global ESG team includes
Our ESG investment practices are fully aligned with Invesco’s goal of helping investors optimize their outcomes, through the construction of pilot scenarios for a pool of global stocks and bonds; the proprietary ESGIntel tool; ESG integration-based approaches to ESG investing; sustainability-focused solutions; positive and in all otherfor fourStrategyasGreatscreening; best-in-class,negativeworst-in-class.resultshavebeenachievedsuchobtainingthePRIA+RatingfortheandGovernancecategoryconsecutiveyears,AandA+categories.
• IEA, What does the current global energy crisis mean for energy investment? (13 May 2022)
Bites and deep dives
• White House, US National Intelligence Council, Global Trends 2040 (2021)
• Ted Talk, A healthy economy should be designed to thrive, not grow | Kate Raworth (watch)
• NATO Science & Technology Organization, Science & Technology Trends 2020–2040 (2020)
• European policy institute, From climate change awareness to climate crisis action (2020)
• IPCC, Climate Change 2022: impacts, adaptation and vulnerability, Summary for policymakers
• WWF, Assessing portfolio impacts (2021)
• OECD, Investment Treaties and Climate Change (April 2022)
• ISPI, Global Policy Forum, 20–21st June 2022 (watch)
• Ted Talk, The Earth is full | Paul Gilding (watch)
• AI, Data and Robotics Partnership, Strategic research, innovation and deployment agenda
• IMO, The future of migration to Europe: a systematic review of the literature on migrant scenarios and forecasts (2020)
• Paul Polman and Andrew Winston, Yes, Investing in ESG Pays Off (13 April 2022)
• Paul Polman, Net Positive (2022)
• The World Bank, Stagflation Risk Rises Amid Sharp Slowdown in Growth (7 June 2022)
• Ted Talk, Let the environment guide our development | Johan Rockstrom (watch)
• Climate KIC, AICCON, Impact investing for climate change (2018)
• David Graeber & David Wengrow, The Dawn of Everything: A New History of Humanity (2021)
• Atlantic Council, Global Foresight 2022 (2022)
• Harvard Business Review, The elusive green consumer (2019)
• IBM Institute for Business Value, Balancing sustainability and profitability
• European Council, Think Tank reports on the invasion of Ukraine (15 June 2022)
• IMFBlog, How War in Ukraine is reverberating across world’s region (15 March 2022)
• Parag Khanna, Move: The forces uprooting us (2021)
4 World Bank Group (2022): Implications of the War in Ukraine for the Global Economy.
8 World Bank (2022): Global Economic Prospects.
References
18 Oxfam (2022): Inequality kills.
20 United Nations, Inter-agency Task Force on Financing for Development (2022): Financing for Sustainable Development Report.
27 Freedom House (2022): Freedom in the world.
28 Carnegie Europe (2022): Supporting Democracy After the Invasion of Ukraine.
47 CoreData Research investors survey (2022).
50 IBM Institute for Value (2022): Balancing sustainability and profitability.
42 UNFCCC (2021): Glasgow Climate Pact, Decision -/CP. 26.
51 CNBC, Middle-Aged Millennials (2021).
53 The European House – Ambrosetti (2021): re-elaboration of DigitalEurope, Gesi, Andrae & Edler data.
49 The Economist (2019).
11 IPCC (2021): Climate Change 2021: The Physical Science Basis.
14 The European House – Ambrosetti (2021): Analysis of World Bank data.
12 IPCC Sixth Assessment Report, Climate Change Impacts, Adaptation and(2022): Vulnerability.
41 Paris Agreement – 12th December 2015 | Art. 2 (1).
46 Bloomberg Intelligence (2022): Global ESG 2022 Outlook: BI Analyst Briefing (webinar at 34:25).
55 King’s College The Policy Institute (2022): Public perception on climate change.
31 Oliver Wyman & World Economic Forum (2021): Financing the transition to a net zero future.
22 Salute internazionale (2021): La spesa sanitaria dei G7, al tempo della pandemia.
48 Reuters (2022): Demand for sustainable funds wanes as Ukraine war puts focus on oil and gas.
36 Re-elaboration by The European House – Ambrosetti on Alliance for Corporate Transparency data (2021).
13 IPCC Sixth Assessment Report, Climate Change Mitigation of Climate(2022):Change.
26 The Economist (2022): Walking away: how to think about the threat to American democracy.
44 Energy & Climate Intelligence Unit (2022).
23 Edelman (2021): Trust Barometer: spring update.
7 European Commission (2022): REPowerEU: affordable, secure and sustainable energy for Europe.
24 World Trade Organization (WTO) (2022): Ministerial Decisions on the TRIPS Agreement, adopted on 17 June 2022, WT/MIN(22)/30.
9 IEA (2022): Global Energy Review: CO2 emissions in 2021.
45 Bloomberg Intelligence (2022): ESG by the Numbers: Sustainable Investing Set Records in 2021.
16 IMF Fiscal Monitor (2017): Tackling inequality.
1 EU Commission (2022): WTO 12th Ministerial Conference secures key outcomes on fisheries subsidies, pandemic response, WTO reform, food security and e-commerce.
2 Reuters (2022): Turkey struggles to push Russia, Ukraine into grain deal to avert food crisis.
10 Earth Overshoot Day.
29 Elaborazione The European House – Ambrosetti su dati HSBC e OECD (2020).
30 Climate Policy Initiative (2021): Global Landscape of Climate Finance 2021.
34 Ibidem.
25 Economist Intelligence Unit (2022): Democracy Index.
35 European Commission, Fit for 55, COM/2021/550 final (2021) – For further information, please refer to The European House – Ambrosetti, European Governance of Energy Transition.
39 Platform on Sustainable Finance (February 2022): Final Report on Social Taxonomy.
37 Eu Parliament (2022): Climate change: Parliament pushes for faster EU action and energy independence.
32 Economist Impact (2021): Sizing the energy transition.
38 Platform on Sustainable Finance (March 2022): The Extended Environmental Taxonomy: Final Report on Taxonomy extension options supporting a sustainable transition.
52 Our World in data (2020): Why did renewables become so cheap so fast?
54 Open Society Foundation (2020): From Climate Change Awareness to Climate Crisis Action.
5 Institute of International Finance (2021) & Reuters (2022): China, US lead rise in global debt to record high $305 trillion.
6 IMF (2021): Policy responses to covid-19.
15 European Environment Agency (2019): Correlation between Ecological Footprint and Human Development Index.
33 The European House – Ambrosetti elaboration on Datamaran (2021).
3 Limes (2022): In Europe and the Pacific, the US and NATO hunt for silk routes.
40 CMIP6 – Coupled Model Intercomparison Project Phase 6.
43 Net Zero Tacker.
17 Oxfam, (2021): The Inequality Virus.
19 World Inequality Lab (2022): World Inequality Report, 2022.
21 Marani et al. (2021): Intensity and frequency of extreme novel epidemics. PNAS Vol. 118 No. 35 2105482118.
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