Did you know?
- Renewables are expected to meet nearly 30% of power demand in 2023.1
- Efficient production and use of materials could help cut CO2 emissions by 25 gigatons.2
- The world consumed 92.1 billion tons of material in 2017.3
Amid recent natural disasters and growing awareness, climate change has become a focus of social discourse, and we believe the ranks of market participants seeking solutions are growing. Many impact issuers contribute to environmental sustainability and help society better prepare for climate change. Here we share some of the environmental and climate-related innovations we are seeing across the impact investing universe.
Alternative energy
In our view, the global energy infrastructure must evolve to support the transition to a low-carbon economy. Alternative energy sources like solar, wind, and hydropower help reduce greenhouse gas (GHG) emissions and slow the global temperature rise, improve health outcomes, and drive both social benefits and cost savings.
- Many companies are engaged in the large-scale investment, construction, and operation of wind and solar power, helping economies decarbonize quickly and efficiently.
- We continue to identify innovative solutions to power storage and distribution projects.
- Solar companies design, manufacture, and distribute photovoltaic (PV) systems and solar modules that convert sunlight into electricity, preventing CO2 emissions.
- Fixed income issuers in our opportunity set include banks and supranationals that have issued green bonds for renewable energy generation projects, including solar and wind farms. This theme also includes investments in corporate issuers using the green bond market to finance grid modernization or the shift from fossil fuels to renewable energy sources.
Resource efficiency
Rising consumption and a dwindling supply of nonrenewable, finite resources like fossil fuels, metals, minerals, arable land, water, timber, and clean air are putting enormous pressure on the planet. Shifting to more responsible, efficient production and use of resources is vital for the environment and global economy. Modernizing resource extraction, production, and distribution methods can help reduce waste, mitigate pollution, save money, and safeguard health.
- We have identified several companies that use smart-metering technology to help customers save energy and reduce waste, lower costs, and shrink carbon footprints.
- Water-pipe manufacturers develop efficient drainage structures that mitigate water scarcity.
- Issuers create energy-efficient office spaces using innovative systems that reduce CO2 emissions and water usage. Their designs can lead to higher worker productivity and better long-term health outcomes for tenants.
- Fixed income issuers we have identified include those underwriting transportation infrastructure projects and building and energy efficiency projects.
Resource stewardship
Amid population growth and rapid urbanization, the need for better resource stewardship is becoming acute. Moving toward self-sustaining, regenerative production and consumption systems and upgrading infrastructure and technologies for safe, effective resource management may become an economic necessity. Decomposing landfills release harmful GHGs, and runoff pollution contaminates surface and groundwater and forms breeding grounds for diseases like cholera and malaria.
- Sustainable waste-processing and recycling companies aim to achieve zero waste and minimize landfill use. Technologically advanced, closed-loop systems turn waste into energy and destroy or recycle hazardous materials, including those inherent in electronic, pharmaceutical, and automotive products.
- Other opportunities include metal-recycling companies and manufacturers of bioplastics and other sustainable materials. These may have long-term positive effects on marine and land ecosystems by preventing the harmful effects of microplastics in soil, sediment, and fresh water.
- Fixed income opportunities include municipal bonds issued by nonprofit organizations to acquire and protect conservation land, including forests. We have also identified debt issued by recycling companies to fund advanced, broad-spectrum waste-recycling solutions, particularly construction waste.
Across the impact investing universe, disruptive companies are developing environmentally oriented solutions to help society adapt to or mitigate the effects of climate change and ensure a sustainable future.
1“Renewables 2018: Analysis and reports to 2023,” International Energy Agency, 2018. | 2“Materials used to build cars and homes key to tackling global warming,” UN Environment Programme, December 2019.| 3“Special edition: progress towards the Sustainable Development Goals,” Report of the Secretary-General, United Nations Economic and Social Council, May 2019.
