How do you think your ecological footprint compares to the average person in your country?
Things to consider:
How often do you eat animal products? How much packaging is there on the food you purchase? How far away is your produce grown? Palm oil? Chocolate? Coffee?
How much water do you use in your home?
How much electricity do you use?
How much trash do you accumulate in relation to your neighbors or other people you know?
Do you buy fast fashion? How much do you buy?
How much do you drive? Do you have an EV or a hybrid? Do you carpool? Do you mostly use public transportation? Do you walk or bike?
How often do you fly?
If you have children in your household, try to compare yourself to the average person with the same number of children of similar ages.
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Earth Overshoot Day: Why investors should be concerned about resource depletion
Research shows that by August 2, the consumption of the Earth's natural resources will have exceeded the capacity for annual regeneration. As investors, however, we are in a position to contribute to pushing back this date, by supporting the transition towards a more sustainable future.
Everyone knows today that humanity uses the Earth's natural resources at a rate that does not allow them to be regenerated. The result of a scholarly calculation, “Overshoot Day” corresponds to the date on which, each year, the consumption of resources exceeds what can be regenerated in 12 months.
According to the latest estimates from the National Footprint and Biocapacity Accounts report, Earth Overshoot Day is August 2, 2023 this year.[1] In other words, our use of natural resources seems to be better controlled[2]. Lately, the situation has tended to get worse year on year, except in 2020, where COVID-19 related lockdowns pushed back the Overshoot Day date by about a month (August 22).
This report points out, however, that while the calculated date has been pushed back five days this year compared to 2022, the actual improvement represents only one day, the remaining four days being due to the integration of new data series in the calculations.
Each country has its own Overshoot Day: developed markets with higher living standards are usually at one end of the spectrum, while developing countries are at the other end. For the United States, the threshold was reached on March 13 of this year, which means that if the world's population consumed at the same rate as the United States, resources would be exhausted by that date. Qatar's Overshoot Day is the earliest (February 10), while Germany, France, Japan and the UK reached this point in May. Jamaica brings up the rear with a date set for December 2023.[3]
These indicators show that the way we use natural resources is unsustainable and that governments, businesses and investors need to act.
How investors can help push back the date
The Global Footprint Network identifies several key areas to limit our use of natural resources, including protecting biodiversity, decarbonising the energy sector and more efficient food production associated with lower waste. These areas are at the heart of responsible investing and we believe investors can make a difference, while still aiming for long-term financial returns.
More than half of the world's GDP depends on healthy biodiversity, and ecosystem degradation costs the global economy more than USD 5 trillion each year. Also, the collapse of pollinators and timber and fish stocks could weigh on global GDP by 2.3% by 2030[4].
As investors, we can seek to protect biodiversity in a variety of ways, including allocating our capital to companies active in water treatment, precision agriculture (which, while producing crops at higher yield to feed a growing population, reduced use of harmful fertilizers and pesticides) and sustainable forest management in the paper and packaging industry.
Switching to renewable energy and moving away from fossil fuels together are a crucial step towards reducing carbon emissions and using natural resources more efficiently. Also, the fact that a growing number of countries are reducing their dependence on fossil fuels generates, in our view, a multitude of investment opportunities, whether they are renewable energy players or companies supplying technologies and services to the sector.
A circular approach
The “take-make-throw away” model on which the global economy is based is partly responsible for the overexploitation of the planet's resources. Instead, we should focus on “repair-reuse-recycle” – the approach that underpins a circular economy model – to keep materials and products in circulation, eliminate waste and regenerate nature.[5]
The Circularity Gap Report 2023 published by think tank Circle Economy and Deloitte[6] suggests that shifting to a circular economy model would meet needs using only 70% of the raw materials we extract today – otherwise said, without exceeding the limits of earthly resources. But there is still a long way to go, as this report estimates that the global economy is currently circular for only 7.2%.
However, the dynamic is positive. In 2020, the European Commission adopted a Circular Economy Action Plan, including measures to ensure products are designed to last longer, be easier to recycle and use recycled materials in their production when possible[7]. In March 2023, the Commission also proposed a directive on the “right to repair”[8], to make it easier and cheaper to have products repaired than to replace them. [9]
Circular solutions can solve some problems related to the way we use the Earth's resources, but also promote the reduction of carbon emissions, the protection of biodiversity, etc[10].
Potential benefits for investors and for the planet
As an asset manager, we can invest on a large scale and support companies active in key areas – biodiversity, energy transition, food and agriculture, circular economy – but also governments through sovereign bond issues.
Companies at the forefront of the transition could experience strong growth, while competitors lagging behind risk seeing demand for their goods and services erode and their cost of capital rise, while they remain under threat of change. regulations or policies such as increases in taxes or tariffs.
Changemakers and their investors are therefore well positioned to take advantage of the situation financially, while contributing to the fight against climate change and reducing our ecological footprint.
Source
Chris Iggo, Jour du dépassement : pourquoi les investisseurs doivent se préoccuper de l’épuisement des ressources, Les Echos, 17-07-2023, https://www.lesechos.fr/partenaires/axa-investment-managers/jour-du-depassement-pourquoi-les-investisseurs-doivent-se-preoccuper-de-lepuisement-des-ressources-1959687
Chris Iggo is CIO, Core Investments, at AXA IM
[1] https://www.overshootday.org/newsroom/press-release-june-2023-english/
[2] Previous Overshoot Day dates – #Delay the Overshoot Day date. Using data from the United Nations and other sources including the Global Carbon Project, the Global Footprint Network calculates Earth Overshoot Day by comparing biocapacity and ecological footprint. https://www.overshootday.org/newsroom/past-earth-overshoot-days/
[3] Overshoot Day by country, 2023 – Earth Overshoot Day https://www.overshootday.org/newsroom/country-overshoot-days/
[4] Mariana Villanueva: Biodiversity Q&A: Understanding a powerful new investment theme; AXA IM Corporate https://www.axa-im.com/news-and-experts-insights/investment-institute/sustainability/biodiversity-qa-understanding-powerful-new-investment-theme#footnote12_ynt572d
[5] Read also: https://www.tumblr.com/lodelcar/678781561847627776/circular-economy-a-start-to-a-new-global-economic?source=share
[6] The Circularity Gap Report 2023; https://www.circularity-gap.world/2023
[7] Changing how we produce and consume: New Circular Economy Action Plan shows the way to a climate-neutral, competitive economy of empowered consumers. https://ec.europa.eu/commission/presscorner/detail/en/ip_20_420
[8] Read also: https://www.tumblr.com/earaercircular/661118774058123264/repairing-electrical-appliances-is-becoming-easier?source=share
[9]Right to repair: Commission introduces new consumer rights for easy and attractive repairs; https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1794
[10] Virginie Derue: The circular economy: A potential value driver across industries, in AXA IMCore, https://core.axa-im.com/research-and-insights/investment-institute/sustainability/environmental/circular-economy-potential-value-driver-across-industries
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August 2 is Earth overshoot day 2023 !
Earth Overshoot Day (EOD) marks when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate during that year.
Today is Earth Overshoot Day 2023, the Earth Overshoot Day calculated every year by Global Footprint Network using data from National Footprint and Biocapacity Accountswhich indicates the official depletion of renewable resources that the planet is able to offer within a year.
This means that today, August 2, humanity has already “finished” all the resources that Nature produces in an entire year and is starting to go into debt. Humanity, with its over 8 billion inhabitants, consumes in excessive quantities, beyond the natural regeneration (and reabsorption) capacities of the planet.
In 1973 Overshoot Day fell on December 3: we were just a few days over our annual budget. In 2003, September 12, in 2013, August 3. The date has always been getting ahead and our ecological debt has grown.
Globally we are consuming the equivalent of 1.7 Planets a year, an ominous figure that is expected to rise to two planets by 2030, based on current trends. In the last 5 years the trend seems to have stabilized, but it is difficult to establish whether this is due to the slowdown of the economy or to decarbonisation efforts. However, the reduction of our “debt” to the planet is still too slow. To achieve the United Nations IPCC goal of reducing global greenhouse gas emissions by 43% by 2030 (compared to 2010) it would be necessary to move Earth Overshoot Day forward by 19 days per year for next seven years.
According to the WWF there are many solutions that can be adopted at the community level or individually to have a significant impact on the type of future we invest in: for example if we used energy from 75% renewable sources we could move the Overshhot day by 26 days ; halving food waste would save 13 days.
“If up until the 1960s humanity was more or less in balance, the date has moved from year to year up the calendar, to arrive today at the beginning of August. This means that humanity has been in ecological overshoot for over 50 years and the debt we have accumulated amounts to 19 years of planetary production, i.e. what Earth’s ecosystems can regenerate in 19 years. The burden of this debt, which is set to increase, is starting to reduce economic options. The loss of biodiversity, the growing unpredictability of the weather and the depletion of groundwater are just a few symptoms. But overcoming itself is not inevitable. Constantly living beyond the physical possibilities of our planet is a limited possibility in time, we risk an ecological disaster: the goods and services that are the basis of our societies and economies are all produced by functioning and healthy ecosystems. We now have many targeted solutions to reverse the overexploitation of resources and support the regeneration of the biosphere in which we live”.
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