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Investing to solve environmental challenges

Ben Constable-Maxwell, Head of Sustainable and Impact Investing at M&G Investments, highlights how your clients can target sustainable returns and positive impact for the planet.

From toxins in the air we breathe to heavy metals in our rivers, there is no shortage of environmental challenges that need to be addressed.

Awareness of these issues is undoubtedly rising among investors, as is interest in solving them. Yet despite this progress, a rising population that consumes more as it grows richer heaps greater strain on the planet.

There is persistent tension between fostering global economic development and reducing the cost to the environment. Addressing this issue is at the heart of the UN Sustainable Development Goals (SDGs), which codify the world’s most pressing sustainability issues.

Where companies can develop solutions that enable the modern economy, while at the same time lowering our environmental footprint, there are powerful opportunities for investment success to go hand-in-hand with delivering a positive environmental impact.

The transformative potential of innovation

With global energy demand forecast to rise 27% by 2040, there is an understandable focus on how electricity can be generated to promote more inclusive and sustainable growth. How we use energy is often overlooked, yet there is great potential to reduce emissions through innovation.

The impact of ‘retrofitting the world’, using technologies that make it more energy-efficient, is demonstrated by Schneider Electric, a French industrial group that is leading the digital transformation of the industrial
automation market.

One way in which the company is having an impact is through innovative solutions that look to tap the value of data to maximise the efficiency of systems. From office air conditioning to electricity grids, the systems underpinning the modern economy are increasingly automated and digitised. Being connected to the ‘Internet of Things’ means critical data can be collected from across smarter systems and then analysed with real-time information, then used to optimise processes.

More efficient systems that cut electricity use will not only save money for Schneider’s customers, but should also result in tremendous environmental benefits. The company aims to reduce the carbon dioxide emissions of its customers by 100 million tons between 2018 and 2020. This is equivalent to the annual CO2 emissions from 17 million homes’ electricity use.

The scale of the long-term investment opportunity – and positive environmental impact – is clear. IHS Markit forecasts that 73 billion devices will be connected to the internet of things by 2025 , up from 27 billion in 2017.

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