Impact investing tackles ESG risks and finds opportunities

25 April 2022

Climate change, unsustainable production and consumption and biodiversity loss all pose significant risks to the global population, but they represent opportunities for businesses and investors, according to global investment manager abrdn.

By 2050, it is estimated that the resources of three planet Earths will be needed to support the global population and its alarming consumption rate. In response, impact investing is gathering momentum among investors, allowing them to allocate away from the companies causing the most severe environmental impacts and invest in companies trying to find solutions.

Sarah Norris, investment director global impact fund at abrdn said: “The innovative solutions and transformational products aimed at solving the world’s problems are also addressing demand from consumers and represent opportunities for businesses to achieve profits as they meet our demands.”

However, it is critical that any impact investment is measurable, says Norris. This way, businesses can be held to account, ensuring that profit and purpose go hand in hand and allowing individuals to see how their investments are allied with positive change.

Norris points to US-based company NextEra Energy Resources, which generates 23 gigawatts of clean energy annually and is moving the energy mix in the US away from fossil fuels towards renewable energy sources.

India, one of the world’s highest emitting countries, is also committed to cutting emissions to net zero by 2070 and this will require vast renewable infrastructure across the whole of the country. Abrdn cites solar power producer Azure Power as an example of a company using clean energy to help meet the energy needs of government utilities and commercial customers.

Food production is also coming under the spotlight, with agriculture and the food production system combined emitting 30% of global greenhouse gases. Abrdn cites dutch life sciences group Koninkijke DSM as making a difference by working to make agriculture practices greener.

Norris added: “These are just some of the ways that the problem solving needed to tackle the challenges of climate change, biodiversity loss and pollution has already begun. In the very near future, you or I will probably use or benefit from one of these products. Investing in the companies that are beginning to make a difference goes a long way to bringing tomorrow’s world closer.”

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