Career Contact Us
Menu

Achieving Sustainability

Sustainable investing: five themes for 2024

Pragmatism is the watchword as we look forward to the topics that may shape sustainable investing in the new year. Here are the five themes to watch.

Key takeaways
  • As attention turns to 2024, we welcome a pragmatic, risk-based approach to addressing critical sustainability-related challenges.
  • Against a backdrop of global instability, the frequency of damaging weather-related events will continue to remind the world that climate is a topic with near-term impact.
  • High-quality, innovative data capture increasingly allows for a robust quantification of risks that underpins ESG 2.0.
  • The topic of transition will be an increasing focus, including from regulators. 
Although the world heads into 2024 facing a number of sustainability-related challenges, we are encouraged by an increasingly pragmatic, risk-based approach to addressing them. This is despite some clear political divisions. As 2023 concludes, slowing economic growth, stubbornly high inflation, fragile politics and tangible evidence of climate change amount to a polycrisis – a cluster of related global risks with compounding effects as foreseen by the World Economic Forum. But as attention turns to 2024, we think we can look forward to an important change of emphasis in key areas, even as the political context remains challenging.
1. The political agenda could pack a “delayed” punch
The coming year will see elections in 40 countries that together account for 41% of the global population and 42% of global GDP.1 The political resonance of the climate topic could peak in 2024 as nations grapple with economic and cost of living challenges. This political agenda risks delaying the financing and implementation of transition plans, and could result in a higher probability of a “delayed transition scenario” as described by the Network for Greening the Financial System.2 Such a scenario has significant implications for economic growth and risk modelling; it also increases the finance needed to achieve the transition at a later date.3 Already, we are quantifying the potential impact on client portfolios in terms of the drag on returns.
Network for Greening the Financial System (NGFS) scenario analysis
Exhibit 1: US policy rates versus economic momentum

Source: NGFS Scenarios Portal, https://www.ngfs.net/ngfs-scenarios-portal/explore/, November 2023
See portal for more explanation of the different scenarios.

2. From climate change to climate impact
Amid these divisions, climate is likely to shift from a distant 2050 concept to a nearer-term priority. While academic studies have modelled temperature and emission increases, they have been less effective at determining the impacts of these increases. The frequency, severity and locations of damaging weather-related events exhibit significant volatility, and the return of El Niño will likely test records in the coming year. Rising financial risk materiality could prompt a rethink, particularly given the costs of the very sizeable and rising fossil fuel subsidies.4 Meanwhile, hotter temperatures are placing additional burdens on already stretched healthcare services5 and biodiversity risks are rising within the global supply chain.6 These topics could influence future sovereign strategies and disclosures as they approach the next wave of nationally determined contributions (NDCs) – the national commitments on climate that countries make as part of the Paris Agreement.
3. ESG is dead, long live ESG 2.0
We anticipate that this greater appreciation of risk materiality will trigger a revived – and significantly refined – return of ESG. When the term “ESG” was introduced in 2004, it sought to broadly classify the key factors contributing to an entity’s long-term operating and financial resilience.7 This was often simply summarised into a blunt, overly simplified ESG score. Since then, ESG has suffered mission creep. It is increasingly associated with “doing good” or imposing values or responsible investing outcomes. In addition, it was assessed using opaque, qualitative assessments with low correlation among the main providers.8 Now, however, we see a trend in high-quality, innovative data capture that will allow for a robust quantification of both impact and dependency risks at company, sector and regional levels. You can expect a thematic paper from us in 2024 on how we will evolve our risk materiality data capture in our Sustainability Insights Engine (SusIE) to include new innovative specialist provider offerings, alongside reviewing new artificial intelligence (AI) data capture techniques.
4. From the transition of regulation to the regulation of transition
The past year has seen sustainability regulation move from fatigue to functioning. With the UK’s proposed Sustainability Disclosure Requirements (SDR), the ASEAN Taxonomy9 and subsequent adjustments to the European Union’s Sustainable Finance Disclosure Regulation (SFDR), we appear to be entering a more pragmatic “norming” phase. As a result, we expect a greater regulatory focus on the concept of “transition”10 to be steadily embedded into climate, impact and sustainability investment frameworks. In September 2023, this was underscored by the Glasgow Financial Alliance for Net Zero, which launched a consultation on transition finance strategies.11 We expect “just transition” to be a focus again at the COP 28 meeting12 amid greater clarity around just energy transition partnerships, which direct money from wealthier economies to support developing nations as they shift away from fossil fuels.13
5. Finding a solution with impact
During 2023, the World Economic Forum issued several publications around the need to invest in solutions, ranging from existing technologies that need to be scaled up to those that do not currently exist. At a time when the market focus is on lowering footprints (ie, the impact that an entity itself has), we need to focus on the handprint opportunities to facilitate this mitigation – in other words, the solutions that will support widescale improvements. The public markets can learn from the private markets and impact investing worlds in how they articulate and measure positive impact, and the governance around targeting and achieving this impact through the life cycle of a project. In July 2023, we published a whitepaper on how we at Allianz Global Investors approach the topic,14 as we roll out new client offerings, and we expect some of the notions we discussed to be increasingly influential in public markets next year.

Recent insights

A woman looking up at the intricate ironwork of the Eiffel Tower from below

Navigating Rates

French government changes: market factors to watch

France is in the grip of political upheaval. But what is the impact on markets?

Discover more

06/12/2024

Aeriel view of water shown through low cloud, with step hills on either side

Achieving Sustainability

Sustainable investing in 2025: five themes to watch

After a year dominated by elections, 2025 will be framed by the aftershocks. We explore five topics that will influence sustainable investing in 2025.

Discover more

04/12/2024

Close-up of a microchip on a circuit board, glowing with orange and gold highlights.

Are semiconductors the new utilities?

Due to both escalating trade tensions – most notably between the US and China – and its growing importance for the rapid development and implementation of AI, the semiconductor industry is currently top of the list of talking points for many market participants.

Discover more

04/12/2024

Allianz Global Investors

You are leaving this website and being re-directed to the below website. This does not imply any approval or endorsement of the information by Allianz Global Investors Asia Pacific Limited contained in the redirected website nor does Allianz Global Investors Asia Pacific Limited accept any responsibility or liability in connection with this hyperlink and the information contained herein. Please keep in mind that the redirected website may contain funds and strategies not authorized for offering to the public in your jurisdiction. Besides, please also take note on the redirected website’s terms and conditions, privacy and security policies, or other legal information. By clicking “Continue”, you confirm you acknowledge the details mentioned above and would like to continue accessing the redirected website. Please click “Stay here” if you have any concerns.

Welcome to Allianz Global Investors, Asia Pacific

Select your role
  • Institutional Investor

  • The website is for use by qualified Institutional Investors (or Professional/Sophisticated/Qualified Investors as such term may apply in local jurisdictions).

    Please read this page before proceeding. By clicking to “OK” this site, the entrant has agreed that he/she has reviewed and agreed on the terms contained herein in their entirety including any legal or regulatory rubric and has consented to the collection, use and disclosure of his or her personal data as set out in the Privacy referred to below.

    The information contained in this website is made available for informational purposes only. Any form of publication, duplication, extraction, transmission and passing on of the contents of this website is impermissible and unauthorised.

    Local Restrictions

    This website or information contained or incorporated in this website has not been, and will not be submitted to, become approved/verified by, or registered with, any relevant government authorities under the local laws. This website is not intended for and should not be accessed by persons located or resident in any jurisdiction where (by reason of that person's nationality, domicile, residence or otherwise) the publication or availability of this website is prohibited or contrary to local law or regulation or would subject any AllianzGI entity to any registration or licensing requirements in such jurisdiction. It is your responsibility to be aware of, to obtain all relevant regulatory approvals, licenses, verifications and/or registrations under, and to observe all applicable laws and regulations of any relevant jurisdiction in connection with your entrant to this Website.

    This website or information contained or incorporated in this website have been prepared for informational purposes only without regard to the investment objectives, financial situation, or means of any particular person or entity. The details are not to be construed as a recommendation or an offer or invitation to trade any securities or collective investment schemes nor should any details form the basis of, or be relied upon in connection with, any contract or commitment on the part of any person to proceed with any transaction. The details are also not to be construed as soliciting/ promoting any financial products or services or a recommendation to purchase or sell any particular security or strategy or an investment advice.

    Forward-looking statements

    The views and opinions expressed in this website or information contained or incorporated in this website, which are subject to change without notice, are those of Allianz Global Investors at the time of publication. While we believe that the information is correct at the date of this material, no warranty of representation is given to this effect and no responsibility can be accepted by us to any intermediaries or end users for any action taken on the basis of this information. Some of the information contained herein including any expression of opinion or forecast has been obtained from or is based on sources believed by us to be reliable as at the date it is made, but is not guaranteed and we do not warrant nor do we accept liability as to adequacy, accuracy, reliability or completeness of such information. The information is given on the understanding that any person who acts upon it or otherwise changes his or her position in reliance thereon does so entirely at his or her own risk without liability on our part. There is no guarantee that any investment strategies and processes discussed herein will be effective under all market conditions and investors should evaluate their ability to invest for a long-term based on their individual risk profile especially during periods of downturn in the market.

    The content may contain statements that are not purely historical in nature but are forward-looking statements, which are based on certain assumptions, risks and uncertainties. Actual events may differ from the those assumed. There can be no assurance that forward-looking statements will materialised or actual market conditions and/performance results will not be materially different or worse than those presented.

    No information on this website constitutes business, financial, investment, trading, tax, legal, regulatory, accounting or any other advice. If you are unsure about the meaning of any information provided, please consult your financial or other professional adviser.

    No Liability

    Allianz Global Investors shall have no liability for any loss or damage arising in connection with this website or out of the use, inability to use or reliance on the contents by any person, including without limitation, any loss of profit or any other damage, direct or consequential, regardless of whether they arise from contractual or tort (including negligence) or whether Allianz Global Investors has foreseen such possibility, except where such exclusion or limitation contravenes the applicable law.

    You may leave this website when you access certain links on this website. Allianz Global Investors has not examined any of these websites and does not assume any responsibility for the contents of such websites nor the services, products or items offered through such websites.

    Allianz Global Investors shall have no liability for any data transmission errors such as data loss or damage or alteration of any kind, including, but not limited to, any direct, indirect or consequential damage, arising out of the use of this website.

Please indicate you have read and understood the Important Notice.