Earth Overshoot Day passed on 1 August which means we have now used more nature resources than can be renewed for the entire year.

At Citywire Selector we constantly hear how environmental concerns are rising higher and higher in terms of investors’ priorities, with finance becoming an increasingly important part of driving this agenda. Citywire-rated managers Thomas Sørensen and Henning Padbergsaid: ‘Before the financial crisis, the climate and environment scene was mostly driven by politics, in areas such as subsidies and regulation. ‘Today, it is all about economics. Investing in environment solutions is a rational decision for consumers and enterprises,’ added the pair, who co-run the Nordea 1 – Global Climate and Environment fund

Companies now understand that improving sustainability is vital to remaining competitive in today’s world, they added. This means the point where it makes economic sense for both consumers and corporates to invest in environment solutions has reached an inflection point.

Influential thinking

The investment industry is in a unique position to influence the debate, according to Andrew Parry, head of sustainable investing at Hermes Investment Management. The scale of assets the industry manages and its vast exposure to the global economy gives the investment space a lot of moving power but efforts by all actors need to be better aligned, he said.

‘The rate in which we are depleting our planet’s resources should serve as a stark realisation that sustainability is no longer an option, it is an imperative. ‘Today is the earliest yet and should act as a reminder of why sustainability is an issue for all of us – as individuals, investors, financiers, companies, governments, NGOs and regulators,’ Parry said. Parry said more work is needed to ensure the financial and business world can go beyond what it deems an already ‘remarkable transformation’ to make major impact..

Not business as usual

Also concerned about the ticking clock in the face of quickening climate change, Neville White, head of SRI policy and research at EdenTree Investment Management said: ‘Business as usual may not be an option when water stress, land reduction, an absence of labour and climate change are all factored in. Until workable solutions have been found for the shortages in land, water and workers, the food supply will continue to be squeezed, with the environment and the poorest people in society suffering the most serious consequences.’

The best investment opportunities arising in the context of addressing these concerns fit into five themes, White said. These include mechanisation, fertilisers, crop protection, plants and seeds and livestock and aquaculture, with current exposure mostly in bio-technology and crop protection. ‘The sector’s broad and deep reach means the risks and opportunities are materially interconnected with a broad range of ESG issues, most materially water stress, climate change and deforestation,’ he said.

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