5 Sustainability Themes to Expect in 2022 (2023)

I moved to a 72-acre farm in rural Ontario a couple of years ago. This experience provided me with a long list of handyman to-do’s and an ever-expanding file of lessons learned. I’ve come to learn that we require the right tools to achieve our objectives, and that no matter how good our toolbox, the outcome of our work remains highly dependent upon our skills and seriousness. These lessons apply equally to sustainable investing and finance, especially as the climate crisis increases the complexity of investing, and the number of themes related to sustainability are proliferating.

In the runup to 2022, it struck me that VUCA--a concept that originated in the mid-1980s at the U.S. Army War College to describe the volatility, uncertainty, complexity, and ambiguity of the world after the Cold War--is still a useful framework to think of where we are now. Greed and fear, as Warren Buffett has quipped, are "two super-contagious diseases [that] will forever occur in the investment community." From my perspective, the dominant feeling today is fear. New strains of the coronavirus continue to emerge; geopolitical tensions are on the rise, with a revisiting of Cold War tensions in Europe between longtime foes; and an increasingly assertive China is cracking down on religious minorities in Xinjiang while flexing its military muscle.

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Clients and capital market colleagues often talk about how climate change is leading to systemic risks, thereby contributing to VUCA and an underlying sense of fear. Hence, the increased interest in what now falls under the rubric of sustainability--environmental, social, and governance practices. For example, heavy rains and flooding have devastated British Columbia in the past month, the third natural disaster to hit western Canada in the last year after a heat wave caused uncontrolled forest fires. Without trees and other vegetation, the barren landscape was vulnerable to flash floods and mudslides. Insurance and rebuilding costs are expected to top the CAD 12.7 billion (USD 10 billion) of Canada’s most expensive natural disaster in Fort McMurray in 2016. That’s just one example of the knock-on effects of climate change. You can see how sustainability challenges can lead to disproportionate negative outcomes for disadvantaged countries and people who don’t have the same financial resiliency. Drought and flooding worsen their hardship and make it more difficult to supply basic needs. And that deepens inequality. Those issues were laid bare by some of the political divisions at the recently concluded climate summit, COP26. Developed nations, which arguably have contributed more to climate change, historically have failed to adequately support the financing of the energy transition for developing countries.

So, what do I expect from 2022? A few themes will help shape the discussion around sustainability.

Theme One: Climate has put sustainability, in general, on the agenda. We will now see a continuing proliferation of social issues intertwined with climate, such as the Just Transition. The Just Transition Declaration, signed by more than 30 countries at COP 26, reflects International Labour Organization guidelines and commits them to find strategies that support communities through the shift to a more sustainable economy. You will see more efforts, such as the EU’s EUR 17.5 billion (USD 19.8 billion) Just Transition Fund as well as investor initiatives like the World Benchmarking Alliance, which will assess how well 180 companies are managing the Just Transition.

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The climate crisis also encompasses a range of other issues, including deforestation, the destruction of biodiversity, pollution, and human rights, among others. Ultimately, these are about the health and resiliency of the planet, which underpins the health and well-being of those who inhabit it. Humans are part of, not separate from, nature. While climate change and weather-related events will dominate the coverage, discussions will be much broader. For example, there is evidence that air pollution worsens the severity of COVID-19. In October, the medical journal The Lancet, predicted that climate change would be the “defining narrative of human health.” All these discussions will pick up momentum. If climate motivates people to think about these problems in a meaningful way, and turn that thinking into action, it can be very positive. The risk is that addressing climate change loses focus because people can use it to promote their varied agendas.

Theme Two: Net zero will focus the discussion for the foreseeable future. The Net-zero transition isn’t simply about reducing carbon; it’s a business model transformation akin to the Industrial Revolution. There will be winners, survivors, and casualties. If you’re on a board of directors, in the C-suite, or allocating capital as an investor, you are trying to figure out what you need to do to be in the winner’s circle, or at the very least to avoid being a casualty. Much is unknown--defining net zero is challenging, as is finding the best path to achieving net-zero emissions. More daunting is contemplating a new business model while the market is evolving swiftly and unpredictably. The investor community, a pillar of the capital markets, must absolutely focus on driving meaningful outcomes through their investments. I read a humorous article that poked fun at the net-zero movement. It was about an Australian man who set an ambitious target to quit drinking by 2050 when he turns 101. He didn’t see that he needed to stop drinking in the short or medium term. That won’t work for net zero. We need to have meaningful progress now or we’re not going to make it.

Theme Three: Divestment and engagement both have a place in the conversation. One of the most critical questions of our time is how we can decarbonize investment portfolios. Thus, an old and much-trodden debate has again emerged on the front page: Divest from high-carbon emitters or engage with them? Divestment decisions are looking very different from the past. Consider Dutch pension fund ABP, which announced in October that it would divest from fossil-fuel producers, citing “insufficient opportunity for us as a shareholder to push for the necessary, significant acceleration of the energy transition at these companies." Critics of divestment argue that the assets simply end up in the hands of private equity or state-owned enterprises, neither of which has cared much about sustainability in the past. The SOEs will surely require political will to change. But even private equity and venture capital are increasingly paying attention to sustainability issues. More and more, owners of capital will demand that their private assets are also engaged in ESG. As banks face more scrutiny from global regulators about climate risk, you can expect to see nudging from the capital markets on the debt side, too.

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As I shared at the beginning, that long list of to-do tasks at my farm has taught me that you need an array of tools, and the outcome depends on how seriously you wield those tools. Instead of simple letter-writing, those who engage with companies need to fundamentally challenge them on their underlying business models and call for significant change, which requires commitment and resources. Engine No. 1, the activist that elected three candidates to Exxon’s board this year, is a very different model of engagement. Can it be done at scale?

What is certainly true is that net zero represents a fundamental transition of the global economy, and grappling with it is part of fiduciary duty. Clients I speak with increasingly are undertaking stress-testing and scenario analysis to ascertain how to position their portfolios. According to one model, by FutureZero in collaboration with Credit Suisse HOLT, pricing carbon at USD 75/ton CO2 equivalent for scope 1 and 2 emissions, results in an erosion of more than $20 trillion to enterprise value globally, 83% of it from just five sectors: materials, utilities, energy, industrials, and consumer staples. I’m not arguing that this analysis can’t be challenged; I’m simply suggesting that the decision to divest from energy can be underpinned by an informed investment thesis that is guided by fiduciary duty.

Theme Four: Sustainability shifts from “nice to have” to “need to have.” As more investors in both public and private assets insist on greater sustainability, a screaming need for consistent, shared disclosure and reporting standards has arisen. Imagine a world without generally accepted accounting principles or without international financial reporting standards. It would be chaos. That’s essentially where we are now. Today, the infrastructure for sustainable finance is falling into place. Recently, the IFRS Foundation announced the formation of the International Sustainability Standards Board, or ISSB, which merges two important standards-setting entities. Meanwhile, efforts by Morningstar and others to clarify the terms used for sustainable investing can also help new investors who worry about green washing and other potential problems.

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In 2022, as the influence of sustainability considerations on long-standing financial reporting, oversight, risk, and regulatory frameworks gain steam, I expect that our habit of speaking about sustainable and responsible investing, ESG, and sustainable finance will begin to fall by the wayside. Increasingly, we will simply refer to the work we do as investment or finance--one’s prefix of choice will no longer be necessary as sustainability becomes the norm.

Theme Five: Here come the retail investors. As Morningstar CEO Kunal Kapoor has noted, the number of ESG ETFs has exploded more than sixfold even as active ESG fund assets keep growing. That, alongside record-breaking asset flows into sustainable funds, may speak to the interest of retail investors who are traditionally last to the party--and whose arrival, to cynical investors, heralds the top of the market. This might be true if sustainable investing were simply a fad, but investors are adopting ESG as part of the transition to a net-zero world. Individuals in North America are a powerful client base for large institutional investors. More growth may come, in fact, as individual investors start investing in sustainable funds through their retirement plans.

I’d argue that retail investors have dual expectations: They care about a secure retirement, financial goals, and risk, but they also care about whether air pollution is giving their children asthma, or whether increased incidence of wildfires means home insurers are curtailing coverage. How ironic it might be that the final people to join this party may be a critical catalyst for moving the conversation toward the impact of portfolios to address these issues. In doing so, they could be the force that creates change.

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FAQs

What are the three themes of sustainability? ›

Sustainability has three main pillars: economic, environmental, and social. These three pillars are informally referred to as people, planet, and profits.

What are ESG themes? ›

10 ESG themes for 2022: The transition mission
  • 10 ESG Themes for 2022.
  • ESG regulation accelerates globally amid challenges.
  • ESG vs. ...
  • Investors put net zero commitments into practice.
  • Investors clamour for forward- looking data.
  • Impact of investor engagement comes into focus.
  • Greenwashing accusations to also hit investors.
10 Mar 2022

What are some sustainability ideas? ›

25+ Ultimate Ideas For Sustainable Living
  • Become a member of a community garden.
  • Practice minimalism.
  • Change the lights in your house.
  • Become more efficient with your errands.
  • Start using natural cleaners.
  • Spend more time reading and playing games.
  • Try to get on a more natural sleep schedule.
  • Reduce, Reuse and Recycle.

How can I help the environment in 2022? ›

Challenge yourself…
  1. Calculate your personal impact with our Footprint Calculator. The first step in making a difference is understanding the impact you're having on the planet.
  2. Try different lifestyle challenges. ...
  3. Eat for the planet. ...
  4. Wear it Wild. ...
  5. Be active and raise funds for vital conservation work.

What are the 4 types of sustainability? ›

The term sustainability is broadly used to indicate programs, initiatives and actions aimed at the preservation of a particular resource. However, it actually refers to four distinct areas: human, social, economic and environmental – known as the four pillars of sustainability.

What do the 3 pillars of sustainability mean? ›

Sustainable development can be applied to corporate policy in the business world as it encompasses three key areas: economic, environmental and social. Sustainable development requires that a company must contribute to economic growth, social progress and promote environmental sustainability.

What are the 3 essential pillars of ESG? ›

The 3 Pillars of ESG. Successful businesses focus on three core essentials: people, process, and product.

What is the difference between ESG and sustainability? ›

ESG is based on standards set by lawmakers, investors, and ESG reporting organizations (e.g., GRI, TCFD, MSCI), whereas sustainability standards — while also set by standards groups like GHG Protocol — are more science-based and standardized.

What are the ESG goals? ›

Environmental, Social and Governance (ESG) goals are objectives set within a business in order to direct and actively manage the organization's impact on society and environmental sustainability.

What are the 5 sustainable practices? ›

Below are five sustainable practices that can become habits to make your lifestyle greener.
  • Reuse Paper and Plastic Bags for Shopping. ...
  • Opt for Paperless Documents. ...
  • Avoid Disposable Kitchen Items. ...
  • Use Eco-friendly Bathroom and Household Cleaning Products. ...
  • Recycle Old Sneakers.

What are the 7 principles of sustainable living? ›

The seven principles are 1) maintain diversity and redundancy, 2) manage connectivity, 3) manage slow variables and feedbacks, 4) foster complex adaptive systems thinking, 5) encourage learning, 6) broaden participation, and 7) promote polycentric governance systems.

What are 10 sustainable practices? ›

10 Simple Sustainability Practices You Can Do At Home
  • Make Use of Natural Light.
  • Eliminate Useless Energy Waste.
  • Stop Food Waste.
  • Reuse Your Containers and Jars.
  • Install Rainwater Tanks.
  • Start Composting.
  • Use Natural Cleaning Products.
  • Choose Cloth Over Paper.
18 Jun 2021

What is the theme for Environment Day 2022? ›

It is celebrated by millions of people across the world. World Environment Day 2022 is hosted by Sweden. “Only One Earth" is the campaign slogan, with the focus on “Living Sustainably in Harmony with Nature”.

What is the theme for Earth Day 2022? ›

Earth Day is celebrated annually on 22 April. The Earth Day 2022 theme is 'Invest In Our Planet'.

How can I be green in 2022? ›

10 ways to go green in 2022
  1. Eco-friendly cleaning products. ...
  2. Reuse as much as possible. ...
  3. Reduce your water usage. ...
  4. Sustainable alternatives to traditional toiletries. ...
  5. Buy better and buy less. ...
  6. Track and balance your carbon footprint. ...
  7. Travel with more intention. ...
  8. Break up with fast fashion.
23 Dec 2021

What are the 7 dimensions of sustainable development? ›

Another model suggests humans attempt to achieve all of their needs and aspirations via seven modalities: economy, community, occupational groups, government, environment, culture, and physiology.

What are the 4 main components of environmental sustainability? ›

Let us look at the four elements of environmental sustainability and environmental regulatory compliance: air, water, management, and risk reduction.

Who made the three pillars of sustainability? ›

Our Common Future is the 1987 publication by the World Commission on Environment and Development (WCED) credited for introducing the concept of sustainable development, with Gro Harlem Brundtland chairing the UN-sponsored Commission.

What are the five importance of sustainable development? ›

Importance of Sustainable Development

All Countries should meet their basic needs of employment, food, energy, water, and sanitation. Everybody is rightful to a healthy, safe, and clean environment. This can be easily achieved by reducing pollution, poverty, and unemployment.

What is sustainability strategy? ›

A sustainability or corporate responsibility strategy is a prioritised set of actions. It provides an agreed framework to focus investment and drive performance, as well as engage internal and external stakeholders. The starting point for any strategy needs to be why the company is in business.

What are the 3 models of sustainable development? ›

The three-pillar conception of (social, economic and environmental) sustainability, commonly represented by three intersecting circles with overall sustainability at the centre, has become ubiquitous.

What is CSR sustainability? ›

Sustainability describes the ability to maintain various systems and processes — environmentally, socially, and economically — over time.

What is ESG in simple words? ›

Environmental, social and governance (ESG) is a term used to represent an organization's corporate financial interests that focus mainly on sustainable and ethical impacts. Capital markets use ESG to evaluate organizations and determine future financial performance.

What are ESG elements? ›

ESG stands for Environmental, Social, and Governance. Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities.

What is an ESG strategy? ›

An environmental, social and governance (ESG) strategy is defined as a business model that emphasizes social responsibility. All businesses seek profits, but today's investors and shareholders want to see businesses making efforts to make the world a better place as they generate those profits.

What is the difference between sustainability and CSR? ›

Sustainability looks forward, planning the changes a business might make to secure its future (reducing waste, assuring supply chains, developing new markets, building its brand). CSR tends to target opinion formers – politicians, pressure groups, media.

Is ESG only about sustainability? ›

The main difference between ESG and sustainability is that ESG sets specific criteria to define environmental, social, and governance systems as sustainable. As we know, in a business context, sustainability may mean different things to different entities and is applied as an umbrella term of doing good.

What is ESG KPI? ›

ESG - Key Performance Indicators for Sustainable Reporting

Environmental, Social, and Corporate Governance (ESG) refers to the three dimensions for measuring the sustainability impact of an investment in Sika. These criteria help to better determine the future financial performance of companies.

How do you set a target ESG? ›

The following article lays out a five-step path for your company to start setting its ESG goals.
  1. Step 1 – Understand the value of ESG goal setting. ...
  2. Step 2 – Assess your ESG baseline before you set your goals. ...
  3. Step 3 – Familiarize yourself with and set SMART goals. ...
  4. Step 3 – Set up a data tracking system for your ESG goals.
8 Mar 2022

How do you develop ESG goals? ›

How To Develop and Implement an ESG Strategy
  1. Step One: Conduct a Materiality Assessment. ...
  2. Step Two: Establish Your Baseline. ...
  3. Step Three: Determine Objectives and Goals. ...
  4. Step Four: Gap Analysis. ...
  5. Step Five: Develop Your ESG Roadmap and Framework. ...
  6. Step Six: Put the Plan into Action and Measure Key Performance Indicators (KPIs)

What are the 3 pillars? ›

For 70 years, the United Nations has worked on the frontlines every day around the world on the pillars of Human Rights, Peace and Security, and Development.

What are the 3 pillars of sustainability PDF? ›

The three-pillar conception of (social, economic and environmental) sustainability, commonly represented by three intersecting circles with overall sustainability at the centre, has become ubiquitous.

Why the three pillars of sustainability is important? ›

The sustainability is not linked only with the environment, but also, with the social and economic environment, forming so, the three pillars that aim to guarantee the planet's integrity and to improve the quality of life.

Who created the three pillars of sustainability? ›

Our Common Future is the 1987 publication by the World Commission on Environment and Development (WCED) credited for introducing the concept of sustainable development, with Gro Harlem Brundtland chairing the UN-sponsored Commission.

What are the 3 essential pillars of ESG? ›

The 3 Pillars of ESG. Successful businesses focus on three core essentials: people, process, and product.

What are the pillars of sustainable development goals? ›

At a broad level, IMF engagement on the SDGs is aligned with the five SDG pillars of people, prosperity, planet, peace, and partnership.

What are the three major aspects of sustainability quizlet? ›

Social equity, environmental protection, and economic growth are the three pillars.

What is sustainability strategy? ›

A sustainability or corporate responsibility strategy is a prioritised set of actions. It provides an agreed framework to focus investment and drive performance, as well as engage internal and external stakeholders. The starting point for any strategy needs to be why the company is in business.

What is a sustainability model? ›

1, 3-10. DOI | ResearchGate. 5. Definition (2014) – SBM to create positive value for all stakeholders. “[A] sustainable business model can be defined as a business model that creates, delivers, and captures value for all its stakeholders without depleting the natural, economic, and social capital it relies on.”

What are the five importance of sustainable development? ›

Importance of Sustainable Development

All Countries should meet their basic needs of employment, food, energy, water, and sanitation. Everybody is rightful to a healthy, safe, and clean environment. This can be easily achieved by reducing pollution, poverty, and unemployment.

What would a sustainable world look like? ›

What does a 21st century sustainable society look like? Primarily, it is self-sufficient. Non-polluting, renewable resources provide the power to drive sustainable energy systems; more efficient farming techniques and new technologies improve yields; and, reduced consumption helps eliminate waste.

What are the 3 models of sustainable development? ›

The three-pillar conception of (social, economic and environmental) sustainability, commonly represented by three intersecting circles with overall sustainability at the centre, has become ubiquitous.

What is CSR sustainability? ›

Sustainability describes the ability to maintain various systems and processes — environmentally, socially, and economically — over time.

What are the 6 principles of sustainability? ›

Make's six principles of sustainability – Carbon, Environment, Community, Wellbeing, Connectivity and Green economy – are guided from concept to completion by the RIBA 2030 Climate Challenge, the LETI Climate Emergency Design Guide, and the UN Sustainable Development Goals.

What is 21st century skill for education for sustainability? ›

21st century skills refer to the development of personal and social skills of individuals, to share information, values, and knowledge, while participating in and contributing to the development of society. This involves being able to function and act in the digital environment [3,4].

What are some examples of social sustainability? ›

Qualify of Life Social Sustainability

For example, affordable housing, physical & mental medical support, education training opportunities, employment opportunities, access to support, and of course safety and security.

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