Schroders identifies major sustainability trends for 2023

Many of the macroeconomic trends witnessed in recent years are expected to continue to drive the sustainability transition over the next few years, said Mervyn Tang, head of sustainability strategy for Asia Pacific at Schroders.

Firstly, energy price inflation is going to help the world to decarbonise by improving energy efficiency.

“As people are trying to improve cost effectiveness when using electricity, it is going to make certain technologies such as heat pumps in buildings more viable,” said Tang.

“I think one of the key trends to watch out for is to identify some decarbonisation technologies that are going to be more viable for the future.”

Secondly, Schroders expects an increased focus on food and water security as food prices continue to rise.

“The global population is going to rise to 10 billion by 2050 and people are going to get richer as well. So that is going to increase the demand for food,” said Tang.

“Agricultural supplies are going to be constrained because of higher global surface temperatures. So in the long run, we’re going to be needing a lot of investment to be able to feed both the existing and new population.”

Thirdly, the cost of living crisis has exacerbated social stresses and companies are coming under pressure to ensure vulnerable workers are protected.

“If you have good relationships with your employees, you can tackle these macroeconomic challenges without your employees becoming unhappy, without them going on strike, without causing disruption,” Tang said.

Despite concerns that the world economy will be going into recession next year, Tang believes there will be little impact upon the direction sustainability investing is heading towards.

With higher rates and cost pressures that companies are facing, there will be a lot of layoffs, especially in the technology and financial sectors, which makes human capital management more important in terms of staff retention.

“Even if we have a recession over the next one to two years, there is a chance that they need their previous workforce to come back when demand changes again.”

As the world continues to reduce its reliance on oil and gas over geopolitical concerns, Tang believes that the focus on green investment and energy stability is going to continue even when rates and the cost of borrowing are higher.