09 Dec 2019
“You thieves!” was yelled aloud by a teenage girl in New York, United States of America (USA), in September.
She screamed once more, “You have taken my dreams.” She pointed the large crowd in front of him. Greta Thunberg, a 16-year-old teenage from Sweden, is her name.
She was delivering a speech on climate change at a UN meeting in New York at the time.
Humans have frequently disregarded the idea of sustainability when using natural resources and living on planet Earth, especially since the industrial revolution in the 18th century. We frequently
fail to consider whether planet Earth will be able to sustain life and the welfare of future generations.
In other words, we are robbing the future from our own children.
A bleak picture of life on Earth was painted in the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) study from last July. Compared to the previous 10 million years, the current rate of species extinction is hundreds of times higher. In the next few decades, around a million species face extinction. Ironically, this catastrophic extinction did not result from a meteor impact or an extraterrestrial invasion from another planet. But because of what we did.
Up to 75% of the land on Earth has been damaged by human activity. More over two thirds of the resources in the ocean have been fully or even beyond maximally explored. Our way of life, different production processes, and consumer habits all contribute to climate change. All of this frequently occurs as a result of our incomplete understanding of how the earth’s ecosystems support human existence.
Because we might assume that all insects are pests, we eliminate them all without discrimination. The New York Times published a story at the end of 2018 titled “The Insect Apocalypse is Here.” This post created a discussion and brought attention to how endangered insects are as the primary source of life for humans. Insects serve as mediators or pollinators for plants. Insects help to nourish soil and break down garbage. The food cycle and life on earth depend heavily on insects.
Some people view peatlands as wasteland. Later, often irresponsibly, we drain the peatlands and remove all the vegetation in order to cultivate particular crops. Then, in addition to losing a diverse ecology, we also lose a remarkable capacity for absorbing floodwaters during the rainy season. Then, during the dry season, the fire rages, destroying not just our people’s lives and economies but also those of our neighbors.
Also, we frequently ignore climate change. Why did the temperature rise by 1.5 Celsius? Yet, because of global warming, sea levels will rise, which will push us further inland and destroy civilizations that have been in existence for thousands of years as well as hundreds of millions of people’s homes. The frequency and severity of natural disasters are both rising due to climate change.
Not only will biodiversity decline due to climate change, but distribution patterns will also shift. Don’t regret it if China or Vietnam sinks the fishing boats of our children in the future. Our fishermen must pursue the fish to subtropical regions because they are no longer able to endure the hotter tropical temperature. Nonetheless, it appears that there is still time to take action, even in the financial and investment sectors. There was a big surge of change at this time.
What’s so bad about sustainable investing?
Almost 2,000 top fund managers and senior executives from different investment firms attended the PRI (Principle for Responsible Investing) annual investment conference in Paris at the beginning of September. Unlike a conference on investments and fund management, none of the presentations covered topics like the state of the economy or potential corporate profits. Participants discussed a variety of environmental, social, and political concerns over the course of three days, including gender equality, child labor, modern slavery, and biodiversity crises. They hold the view that there is no assurance of the sustainability of their investment if environmental and social concerns are not taken into account.
In recent years, a sizable wave of environmentally conscious and socially conscious investing (ESG/Environmental, Social, and Corporate Governance) has expanded quickly. According to PRI, more than 1,900 managers and owners of financial assets currently committed to embracing the sustainability principles. These individuals are in charge of money totaling US$ 89 trillion. The managed funds of ESG-based ETF (exchange traded funds) mutual funds have expanded more than 12 times in the past five years, according to MSCI (Morgan Stanley Capital International).
According to the 2019 US-SIF (Sustainable Investment Forum) survey, investment managed funds in the US that make reference to sustainability principles have increased 38% over the previous two-year survey and now make up more than 25% of all managed funds. Despite the OJK (Financial Services Authority) launching a roadmap for sustainable finance in 2014, the market has in fact been slower to react in Indonesia. Pilot projects for green bond issuance and the regulatory framework have both been completed. The SRI KEHATI Index, the first ESG-based sustainable stock index in Indonesia and even in ASEAN, was introduced by the KEHATI Foundation in 2009, marking the beginning of a five-year project for sustainable investment in the Indonesian capital market.
Also, the KEHATI Foundation is making an effort to persuade investment managers (MI) to create sustainable mutual fund offerings. ESG mutual funds, which use the SRI KEHATI Index, have increased by more than 7 times to IDR 1.5 trillion over the previous two years. Mutual funds have also multiplied quickly, from 2 to 9. Although this is a very positive trend, it is still insignificant in relation to the total number of managed mutual funds in the nation.
Companies and investment managers must act quickly since the flood of sustainable investments based on ESG will not abate. In the end, investments and businesses that care about the environment and society won’t be coerced by authorities or yelled at by NGOs. Afterwards, it will establish standards and values that the market will automatically follow. If a company’s ESG rating, or social and environmental rating, does not satisfy investor standards, it may someday find it difficult to issue bonds. Similar to the stock market, the door will be tightly locked for businesses that do not care about the environment, the people in their community, or who blatantly take the future of their own children.