ESG Topics

Key environmental, social and governance topics

Climate change impacts and adaptation

Climate change is possibly the largest threat to economic and social development worldwide, as increased global emissions and changes to weather patterns threatens the availability of natural resources such as water and arable land, food security and economic growth. 

The 2018 report of the Intergovernmental Panel on Climate Change (IPCC) highlights the rapid, far-reaching and unprecedented changes needed to limit global warming to 1.5°C. In response many countries and cities globally have committed to net zero greenhouse gas emissions by 2050. 

The increase in extreme weather patterns has seen increased flooding and prolonged droughts, resulting in damage to infrastructure and crops, and peoples’ lives and livelihoods. South Africa’s vulnerability to climate change is exacerbated by economic inequality and the current dependency on coal-fired power generation. 

The effects of climate change on food production and water scarcity are of concern to South Africa and the African continent overall. It is already estimated that African countries are spending between two and 9% of their GDP on adaptation, a figure that can be expected to increase dramatically under a business as usual scenario. 

The response, i.e. building climate resilience is the dual concept of taking responsibility for the transition to a low carbon economy coupled with the measures taken to adapt to a changing climate and its impact on key sectors such as agriculture, water services and infrastructure. 

Retirement funds are fundamentally long-term investors on behalf of their members. They are particularly vulnerable to climate change risk, and the risk posed by investing in stranded assets.For example, an investment in a coal mine may deliver short-term returns but over time may not hold value, as consumer trends and regulation force reductions in the use of coal-based energy. 

Nicole Martens, Head of Africa & Middle East, PRI writes:

Effective implementation of the Principles for Responsible Investment requires that investors possess an understanding of the foundational concepts of ESG as well as a working knowledge of relevant thematic areas, such as the Climate Emergency and trends in the policy and regulatory environment, so that they are well-placed to take appropriate action, provide clear instruction and monitor performance of their service providers. 

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