You are probably familiar with the habit of taking stock at the end of the year. I couldn't resist looking in the rear-view mirror too, but above all looking ahead to next year.
As the year 2022 nears its end, it’s an excellent time to take stock. From Triodos Investment Management's perspective, I look at whether we are still on track with our mission to achieve a transition to a sustainable society and economy. I'm talking about the long-term vision to ensure a liveable world for future generations, including my children and grandchildren.
Looking back on the past year, I cannot help but conclude that it has been a particularly turbulent and dramatic year. We have been confronted with a terrible war in Ukraine, high inflation, soaring energy prices and a world bracing itself for a possible recession. Hopefully, the cracks in the economic system will lead to a greater awareness of the need to replace it with a new sustainable alternative. The tensions have had an enormous impact on financial markets and investor sentiment. Share prices turned red and mutual funds saw capital outflows worldwide.
In these circumstances, it’s easy to see how investors may lose sight of their long-term sustainable vision for a while. Instead, sustainable investment segments went against the tide and showed growth. The Global Impact Investing Network (GIIN) recently calculated that impact investments have now shot through the 1,000-billion-dollar mark (USD 1,164 billion). In Europe, Article 9 funds - the most sustainable label based on new European regulations (SFDR and EU Taxonomy) - saw net inflows this year. Despite everything, I find this encouraging.
The urgency is great, but there are solutions
When I look at the conditions in our world, things do not look good. By now, we are all feeling the effects of climate change, and we know that only an energy transition can turn that tide. Many people struggle with hunger, disease and poverty. It saddens me to see that after a period of poverty reduction, we are seeing rising poverty again. Biodiversity is under enormous pressure globally, with dramatic consequences for humans, animals and the environment. As I write this, we are in the final days of COP15 where countries and organisations are trying to find solutions to the dramatic loss of biodiversity. The urgency is great.
Triodos IM, together with all our colleagues and partners, sets out a sustainable long-term vision to combat causes for the problems of social inequality, short-term thinking and blind faith in unbridled economic growth. We constantly draw attention to challenges, identify solutions and finance them. Together with like-minded investors. Because solutions do exist, you just have to apply them.
But we still have some way to go. That much is clear from Follow the Money's recent enquiry into Article 9 funds: as many as half of these funds still invest in oil and gas. What a shocking conclusion. You cannot present something as sustainable and then still invest in oil and gas. By doing so, you are basically deceiving investors who are opting for a sustainable world. You also damage a sustainable classification that investors should be able to place their trust in.
Let's work even harder towards sustainability and transition
Many parties who previously positioned their funds as Article 9 are now toning it down to Article 8. This is a new development that I am disappointed to see; it shows how important intention is after all. If you have the intention to invest more sustainably, you must step up! You don't take a step back.
Unfortunately, many trade-offs are still being made, with sustainability losing out to short-term gain. Companies carry on lobbying for short-term interests and politicians are thinking about the voting booth. Consumers face difficult choices too. Should I invest in solar panels now? Am I flying too often? Do we really need so many presents under the Christmas tree? I know from experience that if you have an electric car you need to have a constant overview of charging stations. It is stressful to have to search for a charging station somewhere in the middle of the countryside. However, the charging infrastructure in the Netherlands is now at a high level, and it will improve even more, thanks to investors with long-term vision.
In 2023, Triodos IM will focus even more sharply on transition themes. Stock markets may remain volatile, but we will stay on our course to be where we have the most impact. As we did over 40 years ago, we will continue to operate at the forefront where we can make a difference and accelerate the transition to a sustainable society and economy. As we take up that pioneering role together with our investors, others will follow - new sustainable investors and other companies in the financial sector.
Together, we can change the world. I am convinced that the transition to a sustainable and liveable world will be within our grasp.