5 Drivers Behind the Sustainable Investing Shift
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Against all odds, sustainable investing in the U.S. smashed records in 2020.
Estimated net flows reached $20.9 billion in the first six months alone—that’s nearly equal to the amount of new money invested in all of 2019.
What is driving the shift to sustainable investing? This visual dashboard from Raconteur explains five key drivers, from generational shifts to investors’ preferred strategies.
Millennial Investors and Personal Beliefs
Interest in sustainable investing is booming across the general population. However, there’s a clear generational trend, as well.
While the portion of each group that is “very interested” in sustainable investing has shot up since 2015, this share is significantly higher for millennials.
Another correlated trend emerges with this.
These days, investors are more likely to follow their conscience. Acccording to a recent report by Schroders, the majority of investors will not budge on investing against their beliefs, even if returns were theoretically higher.
|Level of Investment Knowledge|
|Would you invest against your personal beliefs?||Beginner||Intermediate||Expert|
|Yes, if returns are higher||18%||20%||29%|
|No, I would not invest against my beliefs.||82%||80%||71%|
Top Themes of Interest
Powered by these personal beliefs, which categories are attracting investors? It turns out many investors are very interested in including environment-related themes into their portfolios:
- Plastic reduction: 46%
- Climate change: 46%
- Community development: 42%
- Circular economy: 39%
- Sustainable Development Goals: 36%
- Multicultural diversity: 30%
- Gender diversity: 30%
- Faith-based values: 24%
However, these aren’t the only considerations. Other themes that fit into broader ESG categories such as gender diversity or faith-based values make an appearance, too.
Which Investor Groups are Driving Interest?
Now, we turn our attention to the specific groups that are responsible for the growing momentum towards sustainable investing. This may be surprising to some, but it is institutional investors that are leading the pack by far:
|Group||Share of Group|
|High net worth (HNW) investors||19%|
|Politicians or regulators||13%|
|Industry trade bodies||6%|
This also disproves a common myth that millennials are the only ones interested in the sector. Institutional investors equally want to see a double bottom line: an ROI on their money, while also making the world a more sustainable place.
Sources of Information
So where are institutional investors sourcing their information around sustainable investing? Sharing their ideas in like-minded communities, such as webinars and conferences emerged as the preference for nearly two-thirds of those surveyed in this group.
But how do investors know that their investment is truly sustainable? For this, 34% of global investors feel that third-party labels from independent organizations help lend credibility, and confirm that the chosen investment in question is indeed carried out in a responsible manner.
As more and more institutional investors are digital natives, a significant share of them are also beginning to use social media to influence their decision-making process—and some even rely on it as their key source of research.
Sustainable Investing Strategies
We’ve left the best for last—armed with this knowledge and confidence, which sustainable investing strategies are the most attractive? Here’s how organizations are approaching ESG:
- Sustainability integration: 52%
- Negative screening: 50%
- Shareholder engagement: 31%
- Impact investing: 19%
- Positive screening: 12%
- Thematic investing: 5%
While negative screening—avoiding investments in “sin” stocks such as tobacco or fossil fuels—is still a popular strategy, actively integrating sustainability into one’s portfolio is emerging more front and center.
The Overall Trend of Sustainable Investing
The data makes clear that institutional investors are the main driving forces behind sustainable investment for the time being. But as millennials accumulate wealth, their values may naturally lead them towards more sustainable investment.
Another important point to note is that sustainable investing has been resilient to change. In fact, despite the COVID-induced stock selloff in early 2020, ESG leaders exceeded expectations.
While these drivers evolve over time, it’s clear that sustainable investing is more than having its moment in the spotlight—it’s here to stay.
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Visualizing the Impact of Rising Sea Levels, by Country
Here’s a look at how people around the world could be impacted by coastal flooding by 2100, based on rising sea level projections.
Climate change is already causing sea levels to rise across the globe. In the 20th century alone, it’s estimated that the mean global sea level rose by 11-16 cm.
How much will sea levels change in the coming years, and how will it affect our population?
In the below series of visualizations by Florent Lavergne, we can see how rising sea levels could impact countries in terms of flood risk by the year 2100.
These graphics use data from a 2019 study by Scott Kulp and Benjamin Strauss. Their study used CoastalDEM—a 3D graphics tool used to measure a population’s potential exposure to extreme coastal water levels—and examined rising sea levels under different levels of greenhouse gas (GHG) emissions.
Flood Risk By Region
Which countries will be most severely affected by rising sea levels?
If things continue as they are, roughly 360 million people around the world could be at risk of annual flood events by 2100. Here’s what those figures look like across each region:
On the continent of Africa, one of the countries with the highest number of people at risk of coastal flooding is Egypt.
Over 95% of Egypt’s population lives along the Nile river, with some areas situated at extremely low elevations. The country’s lowest point is 133 m below sea level.
Asia’s population will be more heavily impacted by flooding than any other region included in the dataset.
According to the projections, 70% of the people that will be affected by rising sea levels are located in just eight Asian countries: China, Bangladesh, India, Vietnam, Indonesia, Thailand, the Philippines, and Japan.
One of the most high-risk populations in Europe is the Netherlands. The country has a population of about 17 million, and as of 2019, about half of its population lives in areas below sea level.
The country’s lowest point, the town Nieuwekerk aan den Ijssel, is 6.8 m below sea level.
In North America, the U.S., Canada, and Mexico are expected to see the highest numbers of impacted people, due to the size of their populations.
But as a percentage of population, other countries in Central America and the Caribbean are more greatly at risk, especially in high emission scenarios. One country worth highlighting is the Bahamas. Even based on moderate emission levels, the country is expected to see a significant surge in the number of people at risk of flood.
According to the World Bank, this is because land in the Bahamas is relatively flat, making the island especially vulnerable to sea level rises and flooding.
As South America’s largest country by population and with large coastal cities, Brazil‘s population is the most at risk for flood caused by rising sea levels.
Notably, thanks to a lot of mountainous terrain and municipalities situated on high elevation, no country in South America faces a flood risk impacting more than 1 million people.
By 2100, Polynesian countries like Tonga are projected to see massive increases in the number of people at risk of flooding, even at moderate GHG emissions.
According to Reuters, sea levels in Tonga have been rising by 6 mm each year, which is nearly double the average global rate. The reason for this is because the islands sit in warmer waters, where sea level changes are more noticeable than at the poles.
What’s Causing Sea Levels to Rise?
Since 1975, average temperatures around the world have risen 0.15 to 0.20°C each decade, according to research by NASA.
This global heating has caused polar ice caps to begin melting—in just over two decades, we’ve lost roughly 28 trillion tonnes of our world’s ice. Over that same timeframe, global sea levels have risen by an average of 36 mm. These rising sea levels pose a number of risks, including soil contamination, loss of habitat, and flooding.
As countries are affected by climate change in different ways, and at different levels, the question becomes how they will respond in turn.
What Are the Five Major Types of Renewable Energy?
Renewable energy is the foundation of the ongoing energy transition. What are the key types of renewable energy, and how do they work?
The Renewable Energy Age
Awareness around climate change is shaping the future of the global economy in several ways.
Governments are planning how to reduce emissions, investors are scrutinizing companies’ environmental performance, and consumers are becoming conscious of their carbon footprints. But no matter the stakeholder, energy generation and consumption from fossil fuels is one of the biggest contributors to emissions.
Therefore, renewable energy sources have never been more top-of-mind than they are today.
The Five Types of Renewable Energy
Renewable energy technologies harness the power of the sun, wind, and heat from the Earth’s core, and then transforms it into usable forms of energy like heat, electricity, and fuel.
|Energy Source||% of 2021 Global Electricity Generation||Avg. levelized cost of energy per MWh|
Editor’s note: We have excluded nuclear from the mix here, because although it is often defined as a sustainable energy source, it is not technically renewable (i.e. there are finite amounts of uranium).
Though often out of the limelight, hydro is the largest renewable electricity source, followed by wind and then solar.
Together, the five main sources combined for roughly 28% of global electricity generation in 2021, with wind and solar collectively breaking the 10% share barrier for the first time.
The levelized cost of energy (LCOE) measures the lifetime costs of a new utility-scale plant divided by total electricity generation. The LCOE of solar and wind is almost one-fifth that of coal ($167/MWh), meaning that new solar and wind plants are now much cheaper to build and operate than new coal plants over a longer time horizon.
With this in mind, here’s a closer look at the five types of renewable energy and how they work.
Wind turbines use large rotor blades, mounted at tall heights on both land and sea, to capture the kinetic energy created by wind.
When wind flows across the blade, the air pressure on one side of the blade decreases, pulling it down with a force described as the lift. The difference in air pressure across the two sides causes the blades to rotate, spinning the rotor.
The rotor is connected to a turbine generator, which spins to convert the wind’s kinetic energy into electricity.
2. Solar (Photovoltaic)
Solar technologies capture light or electromagnetic radiation from the sun and convert it into electricity.
Photovoltaic (PV) solar cells contain a semiconductor wafer, positive on one side and negative on the other, forming an electric field. When light hits the cell, the semiconductor absorbs the sunlight and transfers the energy in the form of electrons. These electrons are captured by the electric field in the form of an electric current.
A solar system’s ability to generate electricity depends on the semiconductor material, along with environmental conditions like heat, dirt, and shade.
Geothermal energy originates straight from the Earth’s core—heat from the core boils underground reservoirs of water, known as geothermal resources.
Geothermal plants typically use wells to pump hot water from geothermal resources and convert it into steam for a turbine generator. The extracted water and steam can then be reinjected, making it a renewable energy source.
Similar to wind turbines, hydropower plants channel the kinetic energy from flowing water into electricity by using a turbine generator.
Hydro plants are typically situated near bodies of water and use diversion structures like dams to change the flow of water. Power generation depends on the volume and change in elevation or head of the flowing water.
Greater water volumes and higher heads produce more energy and electricity, and vice versa.
Humans have likely used energy from biomass or bioenergy for heat ever since our ancestors learned how to build fires.
Biomass—organic material like wood, dry leaves, and agricultural waste—is typically burned but considered renewable because it can be regrown or replenished. Burning biomass in a boiler produces high-pressure steam, which rotates a turbine generator to produce electricity.
Biomass is also converted into liquid or gaseous fuels for transportation. However, emissions from biomass vary with the material combusted and are often higher than other clean sources.
When Will Renewable Energy Take Over?
Despite the recent growth of renewables, fossil fuels still dominate the global energy mix.
Most countries are in the early stages of the energy transition, and only a handful get significant portions of their electricity from clean sources. However, the ongoing decade might see even more growth than recent record-breaking years.
The IEA forecasts that, by 2026, global renewable electricity capacity is set to grow by 60% from 2020 levels to over 4,800 gigawatts—equal to the current power output of fossil fuels and nuclear combined. So, regardless of when renewables will take over, it’s clear that the global energy economy will continue changing.
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