How to invest and be kind to our planet
It’s Good Money Week – an annual event that runs in October each year, and which is designed to help...
Developing a circular economy is key to achieving the UN’s Sustainable Development Goal #12: responsible consumption and production. Progress in this area has decreased over the last year according to research by M&G^, but as the availability of natural resources falls and consumer demand rises, it’s imperative we get back on track. In a circular economy, waste from production and consumption becomes a resource to be recycled, repaired and reused. But it also goes one step further: by not creating waste in the first place.
“If it can’t be reduced, repaired, rebuilt, refurbished, refinished, resold, recycled or composted, then it should be restricted, redesigned or removed from production.” — Peter Seeger, social activist
The aim of SDG 12 is to ensure sustainable consumption and production patterns globally through eleven different targets. Reduce, reuse, recycle is a present theme, but it also tackles areas such as efficient use of natural resources, global food waste and sustainable tourism as well as also encouraging companies to integrate sustainability information into their reporting.
For decades, the world – and specifically developed countries – have relied on a throwaway culture. According to the UN, the global material footprint increased by 70% between 2000 and 2017*. And, despite initiatives like the one here in the UK, some 5 trillion single-use plastic bags are still thrown away each year and 1 million plastic drinking bottles are purchased every minute*.
Another area of concern is the fashion industry. Garment production is one of the most labour-intensive manufacturing industries, with estimates suggesting it employs upwards of 60 million people worldwide. Ketan Patel, co-manager of EdenTree Responsible & Sustainable UK Equity, is one of the most impassioned speakers I’ve ever heard talk about the dangers of fast fashion, and last year he explained why fast fashion doesn’t make any investment sense.
Not only are we throwing out clothes after a handful of wears, we’re also not disposing of our electronics in a responsible way. In 2019, the world generated 53.6 million metric tons of e-waste, an increase of more than 20% since 2014*. Research by the UN also suggests that it will result in a significant loss of valuable raw materials, such as gold, platinum and cobalt, with as much as 7% of the world’s gold potentially contained in e-waste*. Improper disposal also causes poisonous chemicals to be released into the soil and water, raising environmental and health risks.
There are plenty of established businesses already making significant strides towards a closed-loop process, such as waste water management, recycling services and sustainable packaging – all working to tackle the increase in waste.
Lesley Duncan, manager of ASI UK Ethical Equity, told me about Mondi, the paper and packaging manufacturer: “The company’s motto is paper where possible, plastic when useful. Putting this into practice, the company is aligned to the UN SDG 12 through its sustainable packaging and paper solutions, which help reduce the use of plastics. Additionally, Mondi has implemented challenging carbon reduction plans that are industry leading, and which we continue to monitor with interest through our ESG engagement.”
Similarly, energy efficiency, energy storage and grid enhancements also help tackle excess consumption. The VT Gravis Clean Energy Income fund is an entire portfolio of renewable energy and energy-efficiency related projects. SVS Church House Tenax Absolute Return Strategies fund also has a long term holding in SDCL Energy Efficiency, which offers a service to companies whereby they can get more efficient and cleaner energy. Co-manager James Mahon told us more about the holding as part of our sustainable energy series.
Additionally, companies that create a positive impact through sustainable supply chains have the potential to generate material change. The managers of Artemis Positive Future fund are looking for those firms making a material positive impact on the world through either environmental or social improvements. They also report asset allocation of their fund by UN SDGs on the fund factsheet. For example, the portfolio currently has 12.1% in companies related to SDG 12: responsible consumption and production and 19.8% to SDG 9: industry, innovation and infrastructure**.
A growing population, combined with unsustainable use of natural resources, further propels climate change, destroying nature and raising pollution. Shifting to sustainable consumption and production is key to addressing global threats, including climate change (SDG 13) and biodiversity loss (SDG 15). With the world so eager to return to travel, sustainable tourism has never been as significant, and tourism is an important source of employment in developing countries (SDG 8). Plastic pollution drastically affects ecosystems and the livelihoods associated with them (SDG 14), especially small island developing countries.
^Source: The SDG Reckoning, M&G Investments, Oct 2021
*Source: UN Sustainable Development Goals, 2021 Report
**Source: fund factsheet, holdings as at 31 December 2021