Page 11 - DIY Investor Magazine | Issue 38

Today, global environmental challenges are more
clearly defined, the impacts from failure to address them acknowledged, and concrete solutions exist in most areas.
Clean technologies are becoming more economically competitive and regulatory action is beginning to catch up
with scientific knowledge. In our view, environmental solutions investors are better placed to capture unfolding secular (long- term) trends in the global sustainable transition than ever before.
Reflecting on the Brundtland Report shows how far we have travelled and how much further we have yet to go. We believe that the global economy is beginning to experience the compound effects of deepening environmental knowledge, widening communication on sustainability and social issues, and advancing green technologies.
The fact that challenges such as climate change and biodiversity loss are now recognised as inter-connected, shows that the seeds planted by the Brundtland Report are now bearing fruit.
EMBRACING COMPLEXITY
Since 1987, the environmental solutions landscape has become more complex. The structural growth opportunity is accelerating but so is its complexity. We believe this places specialist active managers at an advantage. Environmental solutions are today a fertile area for dedicated, specialist stock-pickers.
Perhaps the biggest development we have observed since the Brundtland Report is the sheer volume of academic and non-academic literature accumulated about environmental challenges.
The first Assessment Report issued by the Intergovernmental Panel on Climate Change (IPCC), which reviewed everything known about climate change at the time, was 414 pages.
The sixth Assessment report, issued in 2023, was 2,409 pages. Published academic papers on ecology-related topics have grown apace.
‘ALTHOUGH THE THREATS ARE SEVERE, THE WORLD HAS NEVER BEEN IN A STRONGER POSITION TO ADDRESS THEM’
OZONE LAYER RECOVERY
One example of positive change since 1987 is the ozone layer, which, after suffering years
of depletion from damaging manufactured chemicals such as halocarbon refrigerants and foam- blowing aerosols, is now showing signs of healing.
The way the world came together to address the ozone layer problem shows how important it was to effectively communicate the seriousness of the threat. The prospect of ultraviolet rays damaging people’s skin, causing cancer and other dangers, was too immediate to ignore.
We are now nearing a similar phase of climate and biodiversity awareness. Extreme weather events are occurring more often, seasons are shifting, food yields are suffering due to disasters, insurers are accumulating extreme losses, coral reefs are bleaching and ice sheets are melting.
These are all examples of climate change impacts which are easy to comprehend by the public and which inevitably will lead to increased calls for action.
Fortunately, scientists are doing their part in communicating these threats. Although the threats are severe, the world has never been in a stronger position to address them. Renewable energy costs have fallen for solar, wind, and batteries. Funding for climate tech has grown.
Engineers are supported by increasingly sophisticated technology, software and computational power. Governments and regulators are pushing for climate action, biodiversity protection and sustainable development.
Targets are now in place to limit global warming and protect natural capital following the COP 21 conference on climate change held in Paris in 2015, and the COP15 conference on biodiversity held in Montreal in 2022.
The world now knows what needs to be done and there is an action plan for carrying out the transition.
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Aug 2023
DIY Investor Magazine ·