Equities’ view: Impact and sustainable investing have been the purview of institutions — and institutional investors. For those investment styles to break through to a wider swath of investors, companies will need to package investments that don’t require accreditation. That’s urgent today because the European climate agency recently reported that 2023 was the hottest year on record, with temperatures showing an increase that’s in line with the 1.5-degree-Celsius threshold outlined in the Paris Agreement.
Here’s a summary of developments in impact investing, ETF investments for the average investor, sustainable finance, ESG, climate technology and funds, and the energy transition:
1. Democratizing impact investing: Efforts are being made to democratize access to impact investing, allowing more investors to contribute to social and environmental solutions globally, Beth Bafford of Calvert Impact told Jeff Gitterman on FintechTV. This includes discussions around funds like the Greenhouse Gas Reduction Fund and differentiating impact investing from philanthropy.
2. Risks and challenges in climate investments: Retail investors, says Carbon Collective, should be aware of various risks associated with climate investments, such as policy and regulatory changes, technological risks, market and economic fluctuations, and physical risks from climate change itself. It’s important to conduct thorough research and consider these factors when making investment decisions.
3. Tools and resources for climate investment: Investors can leverage tools like climate-related financial disclosures, corporate sustainability reporting, and climate risk assessment tools to make informed decisions, says Carbon Collective. Additionally, indices and benchmarks for climate investments, such as the MSCI Low Carbon Index, can be useful for tracking and managing investments focused on climate action. That index comprises Microsoft MSFT , Tesla TSLA and JP Morgan JPM .
4. Roundup of funds geared to smaller investors: 1. SPDR MSCI ACWI Climate Paris Aligned ETF NZAC : This exchange traded fund aims to provide investment results that correspond to the total return performance of the MSCI ACWI Climate Paris Aligned Index. 2. BlackRock Infrastructure Sustainable Opportunities Fund: This fund focuses on sustainable infrastructure projects, offering a way for investors to contribute to sustainable development while seeking financial returns. 3. BGF Climate Action Equity Fund: This fund, launched in December 2021, aims to invest in companies globally that are making a positive contribution to mitigating climate change.
5. Climate technology breakthroughs: In 2024, several climate technologies are making significant breakthroughs, according to MIT Technology Review. Enhanced geothermal systems are gaining attention as a promising field, and heat pumps, known for their efficiency in heating and cooling, have seen a surge in sales. They have the potential to significantly reduce emissions, equivalent to removing all cars in Europe from roads by 2030. Another notable mention is offshore wind power, which is navigating some challenges but could see major developments in 2024.
6. NASA’s climate research satellite: NASA is preparing to launch the Plankton, Aerosol, Cloud, and Ocean Ecosystem (PACE) satellite, which aims to gather critical data to fight air pollution and climate change, according to UPI. The satellite will provide new insights into the exchange of carbon dioxide between the atmosphere and oceans and will monitor the health of the world’s oceans through the study of phytoplankton.
7. Global heat record: The European climate agency, Copernicus, reported that 2023 was the hottest year on record, with temperatures showing an overall increase of 1.48°C above pre-industrial levels. This is in line with the 1.5-degree threshold outlined in the Paris Agreement. This month is also on track to be so warm that, for the first time ever, a 12-month cycle may exceed the 1.5°C threshold. These findings underscore the urgency for aggressive climate action.
8. Climate lawsuits and financial risks: Investors are increasingly at risk of overlooking the potential financial impacts of climate lawsuits, the University of Oxford said. Research from the Oxford Sustainable Law Programme indicates that many investors and regulators are not adequately considering these risks in their climate-related financial risk evaluations. This oversight could lead to significant financial implications, especially for large carbon emitters who could face trillions in damages from climate lawsuits.
9. Impact investing trends: The impact investing market is projected to grow significantly, nearly doubling from $495.8 billion in 2023 to around $1 trillion by 2027. This growth is partly due to the increasing appeal of impact investing as a means to address societal issues while achieving stable returns. Multifamily properties, in particular, are seen as a significant opportunity for investors looking to make a positive social impact, address climate change, and realize strong returns, reports Multi-Housing News.