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Five sustainability themes for 2024 and beyond

Are we at a crossroads for sustainability? We look at five themes for 2024 and beyond.

Important information - This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Momentum on sustainability stalled in 2023. After years of progress, the UK government have chipped away at legislation for protecting the environment. They’ve delayed plans to prohibit the sale of new combustion engine-powered cars, and are granting more oil & gas exploration licences.

The December COP 28 climate conference offered a glimmer of hope. For the first time, the final agreement recognised the need to bring an end to the fossil fuel era. But, there are still many practical questions about how this can be done.

It feels as if we’re at a crossroads. The choices in the coming year will impact how effectively we’re able to address environmental challenges, tackle climate change, and build a more sustainable future. Here, we think about five themes that will impact sustainability for 2024 and beyond.

This isn’t personal advice. Remember, all investments and any income they produce can fall as well as rise in value – you could get back less than you invest. If you’re not sure an investment is right for you, ask for financial advice.

Learn more about responsible investing

To learn more about investing with sustainability in mind, take a look at our Responsible Investment hub.

Politics and sustainability

2024 is the biggest election year in history, 4.2bn across more than 50 countries will be heading to the polls. As political parties look to win over voters, the environment and sustainability will become important battlegrounds.

On one hand, this will raise awareness of sustainability issues, but it also poses serious challenges to sustainability initiatives if green policies are weaponised for political gain.

Greater focus on nature

It’s increasingly being recognised across the investment industry that a company’s impact on nature, like emissions, is an important consideration. But assessing it isn’t easy.

Nature-related information and data is limited, and often doesn’t have standardised metrics. That’s why the Taskforce for Nature-related Financial Disclosures launched its framework last year. The framework has a standardised approach for financial institutions to assess and disclose their impacts on nature.

As companies begin to report using the framework, investors will be able to carry out more detailed analysis.

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The rise of AI

Artificial Intelligence (AI) is a powerful tool that can be used to address complex sustainability challenges, from optimising resource use to judging environmental risks.

Expect to see sustainability-focused fund managers using AI more and more to handle the huge amount of information and data that’s now available to them. This could improve decision making processes and find new opportunities. Early movers could be putting themselves at a significant advantage to the competition.

Regulation changes

A lack of industry standard definitions and transparency has muddied the waters for responsible investors. The ambiguity has caused some fund managers to overstate the progress they’ve made at integrating sustainability into their investment processes – this is known as greenwashing. This has damaged trust in the industry, and increased investor scepticism.

The Financial Conduct Authority (FCA) recently introduced its Sustainability Disclosure Requirements regulation to try and fix this. With strict new requirements for funds that want to market sustainable characteristics coming into force later this year, it means that sustainable funds will need to sort themselves into one of four buckets:

  • Sustainability Focus – Invests in sustainable assets underpinned by a strong, evidence-based standard for sustainability.

  • Sustainability Improvers – Invests in assets with the potential to become more sustainable over time, including in response to stewardship.

  • Sustainability Impact – Invests in companies that provide solutions to environmental or social problems.

  • Sustainability Mixed Goals – Invests across different sustainability strategies aligned with the other three categories.

Rising expectations

Companies with unsustainable practices, like those in areas like fast fashion, might face increased scrutiny. For instance, the EU and Switzerland generated 7mn tonnes of garment waste in 2020, with about 70% ending up in landfills or incinerated. The fashion industry is also responsible for roughly 10% of global greenhouse gas emissions.

While some brands are making efforts to promote longer use of clothing and use recycled materials, those ignoring sustainability might face regulatory challenges and changing consumer preferences.

Millennials (those born between 1981 and 1996) are more interested in sustainability than any generation before them. They're the largest living adult generation and willing to change their buying habits based on their views of a company’s sustainability credentials.

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Written by
Dom Rowles
Dominic Rowles
Lead ESG Analyst

Dominic leads the team responsible for developing ESG integration across the business, and ensuring best practice is upheld.

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Article history
Published: 18th January 2024