Earth Overshoot Day 2024: The day of the year the world uses more than it creates

Tomorrow, the 1st August is a significant and alarming date. It marks Earth Overshoot Day for 2024, the day on which we consume more ecological resources, or natural capital, than the earth can regenerate in a year.

What is Earth Overshoot Day?

Earth Overshoot Day is effectively the day our annual budget runs out and we go into deficit. The results are scary – think of soil erosion, desertification, reduced cropland productivity, overgrazing, deforestation, rapid species extinction and increased carbon concentration in the atmosphere.

With the overshoot date landing on 1st August, it means that for the full year we will be using roughly 1.7x of our planet’s resources. A rising population (there were only 3.7bn people in 1970 versus 8.2bn in 2024) and improving living standards are the principal culprits for the date landing earlier in the year – although waste of certain resources is also a major concern.

The implications of Earth Overshoot Day

With the UN estimating the global population to be close to 10 billion in 2050*, we would need the equivalent of three planet earths – meaning Earth Overshoot Day would fall in early May. To put this into context, the first Earth Overshoot Day in 1970 actually landed on December 23**.

The good news is that the trend is slowing; last year Overshoot Day was on 2nd August and was on 28th July in 2022. But once you look at the individual country Overshoot Days, you can see how hard it might be to reverse the trend to any great degree. Qatar (11 Feb) was the earliest to hit this date in 2024; but many developed world powerhouses like the US (14 March), Australia and Russia (5 April), Germany (2 May), France (7 May), Italy (19 May), China (1 June) and the United Kingdom (3 June) are all hitting their targets in the first half of the year**.

Slowing the trend

The Global Footprint Network identifies various areas which it believes are most likely to reduce our use of natural resources, including protecting biodiversity, decarbonising the energy sector and more efficient food production alongside reducing food waste. These are all areas critical to responsible investing and where it can make a difference, while still aiming for long-term financial returns.

Over half of global GDP depends on high-functioning biodiversity and ecosystems – degradation costs the global economy more than $5 trillion each year***. The collapse of three such natural services alone – wild pollination, timber and fish supply – could cost 2.3% of global GDP by 2030***. Part of the solution is to increase our spending towards protecting biodiversity in areas like precision agriculture, water treatment, sustainable forestry and clean energy.

However, decoupling economic growth from resource consumption is a challenging task. Figures from Schroders show that GDP and our ecological footprint have a 96% correlation****. Figures also show the only time Earth Overshoot Day moved back was during a recession – Covid-19 and the Great Financial Crisis, for example.

One solution is the move to a circular economy – rather than the ‘take-make-dispose’ approach. The 2023 Circularity Gap Report from the Circle Economy think tank and Deloitte suggests that moving to a circular economy model can meet society’s needs, using only 70%*** of the raw materials we now extract and use from the Earth – meaning we would not overshoot the Earth’s limits. However, a fully circular economy is a long way off – the report estimates the global economy is currently only 7.2% circular***. Circular solutions can also help protect biodiversity and lower carbon emissions.

Sustainable investment opportunities

It’s very rare you have a theme that is undeniable – but given we only have one planet and a fixed supply of natural resources, it means the world has to work to not just stop but reverse this trend. There are now thousands of companies offering solutions in various areas like biodiversity, water treatment, clean energy and more – giving active managers an excellent opportunity to tap into these businesses at an early stage. Here are a few funds to consider.

Biodiversity

The argument for climate change is well documented. But we also have major concerns over water scarcity and biodiversity – with figures from The Living Planet Index showing an average 68% decrease in mammal, bird, amphibian, reptile and fish population sizes between 1970 and 2016^. A good all-rounder here would be the Ninety One Global Environment fund, a concentrated portfolio of 20-40 holdings, all of which contribute to the decarbonisation of the world economy. Another would be the Rathbone Greenbank Global Sustainability fund, where each holding will have at least one positive environmental, social or governance attribute.

Water management

With the global population rising, the United Nations predicts a 40% global water supply shortfall by the end of 2030*. This would be the case if current consumption and production patterns remain unattended and unchanged. IFSL Marlborough Global Innovation invests in societal change; for example, it invests in water infrastructure and purification businesses Xylem^^ and Water Intelligence. Xylem transports, treats and tests water for government, municipal and industrial businesses. It’s been a part of numerous infrastructure projects to upgrade wastewater pumping and treatment infrastructure over recent years in London.

Climate Change

Launched in 2021, the JPM Climate Change Solutions fund is a high-conviction thematic portfolio that is not constrained by the index. The key themes it seeks to tackle are renewables & electrification, sustainable transport, sustainable food & water, sustainable construction, and recycling & re-use. The portfolio combines artificial intelligence, big data, and active equity research to build a data-driven and sustainable portfolio. The team then considers factors such as the attractiveness of the business, including its economic value creation, sustainability, and governance.

Clean energy

VT Gravis Clean Energy Income taps into the mass adoption of renewable energy. It invests in a blended portfolio of the best listed vehicles across the developed market and gives an anchor to portfolios through defensiveness and steady income. The portfolio includes assets that derive energy from renewable, zero emissions sources, as well as companies saving energy through efficiency measures. This includes solar, wind and hydro-electric power, as well as energy storage, energy efficiency, bioenergy, geothermal, heat pumps and the smart grid.

Infrastructure

Net zero will really only be achieved by a substantial investment in infrastructure assets. When it comes to electrification of the transport sector, for example, a huge proportion of investment will need to be in the transmission and distribution networks behind the charging station – the utilities which will help us get from place to place. There is also aviation, shipping, and the industrial sector to consider. First Sentier Global Listed Infrastructure fund seeks to deliver income and some capital growth by investing in listed infrastructure companies around the world. It invests in ‘hard’ infrastructure around the world, via listed companies that own the assets.

*Source: United Nations
**Source: Earth Overshoot Day
***Source: AXA Investment Managers, 5 June 2023
****Source: Schroders, 8 February 2023
^Source: WWF, Living Planet Report 2020
^^Source: fund factsheet, June 2024