SDGs in focus: climate and nature

The UN’s Sustainable Development Goals (SDGs) provide a framework for achieving a better, more sustainable future for all. In this article, we review the developing nexus of climate and nature, a twin crisis that sits at the heart of the 2030 Agenda, which we see as critical to achieving the SDGs.

What are the United Nations Sustainable Development Goals?

The United Nations Sustainable Development Goals (SDGs) are a collection of 17 interconnected goals, which collectively form a blueprint for peace and prosperity for people and the planet, now and into the future. The goals, which must be achieved by 2030, cover areas such as ending poverty and improving health, reducing inequality, tackling climate change and preserving our oceans and forests.

An urgent sustainability challenge

The past year has been an extraordinary one for the climate. Europe and Africa broke temperature records, while the former was also battered by unprecedented rainfall and catastrophic flooding. Antarctica set a sea-ice melt record, the world’s oceans suffered extreme marine heatwaves, and intense heat persisted across much of the United States and Latin America. All of this occurred as global average temperatures registered their highest ever recorded anomaly of 2°C above pre-industrial levels and as scientists confirmed 2023 as ‘virtually certain’ to be the hottest year in 125,000 years¹.

What is becoming clear is that extreme weather from climate change is just one of the urgent sustainability challenges we face. Just as problematic are the accelerating degradation of nature and the harmful impacts of unrestricted pollution, which contribute to the mounting risks to earth’s natural ecosystems.

The Planetary Boundaries

The concept of ‘Planetary Boundaries’, devised by Johan Rockström and peers at the Stockholm Resilience Centre, is being embraced as a scientific framework to reflect both the complexity and the interconnected nature of the various planetary systems that enable a habitable and thriving planet earth. The Centre's most recent analysis suggests we are pushing through numerous thresholds required to keep within an equitable, sustainable and habitable planet.

The boundaries include ‘climate change’ and ‘biosphere integrity’ (effectively, biodiversity) but also constitute ozone depletion, land system change, freshwater use and pollution by ‘novel entities’ such as plastic waste. It provides a valuable – and science-based – frame for understanding humanity’s combined impacts on the climate and nature, and is a useful indicator of the levers required to prevent further deterioration, and importantly, to pull us back within the boundaries. Our own analysis counts SDG 7 (Clean energy), SDG 14 (Life below water) and SDG 15 (Life on land) as making some of the weakest progress among all the 17 Global Goals.

Figure 1: The Planetary Boundaries framework

Source: Azote for Stockholm Resilience Centre, based on analysis in Richardson et al 2023.

Climate and nature – what’s at stake?

The impacts of climate change are well-documented and becoming increasingly evident. However, what is less understood is that we have already transgressed earth’s planetary boundary for climate change, beyond which, there is an increasing likelihood of extreme and irreversible impacts. This is evidenced on a number of fronts.

We have reached a point at which the loss of summer polar sea-ice is almost certainly irreversible. Breaching this threshold means that rapid physical feedback mechanisms can drive the earth system into a much warmer state with sea levels metres higher than present. The weakening or reversal of terrestrial carbon sinks, through the ongoing destruction of the world’s rainforests, is another potential tipping point, where climate-carbon cycle feedbacks accelerate earth’s warming.

Biodiversity describes the diversity within species, between species and of ecosystems. It is ‘an essential characteristic of nature that enables assets to be productive, resilient and able to adapt to change’. Maintaining and promoting biodiversity is, therefore, core to the continued provision of benefits from nature to society.

However, the Millennium Ecosystem Assessment of 2005 concluded that changes² to ecosystems due to human activities were more rapid in the past 50 years than at any time in human history, increasing the risks of abrupt and irreversible changes². The main drivers of change are the demand for food, water, and natural resources, causing severe biodiversity loss and leading to deterioration in ecosystem services. These drivers are either steady, showing no evidence of declining over time, or are increasing in intensity.

Interconnected planetary crises

These two interconnecting ‘planetary crises’ – climate change and nature loss – are combining to threaten human well-being, the stability of the global economy and the sustainable functioning of the planet. There is mounting evidence that aiming to tackle one without addressing the other will result in a failure to achieve the desired outcomes for both.

Climate change is a major driver of biodiversity loss. At the same time, the degradation of nature also accelerates climate change, due to damage to the crucial role played by natural ecosystems in sequestering CO₂ and managing atmospheric heat. Consider, for example, the different ways in which heat is absorbed and reflected by concrete rather than tree canopy. These twin and compounding crises are causing irreversible damage to nature's ability to provide the 'ecosystem services' on which humanity depends for food, drinkable water and clean air.

It is largely the same human activities that are causing both crises, while a number of the solutions to tackle climate change can also support nature and biodiversity. Damage to forests, mangroves and other natural ecosystems – driven by industry and agriculture – has harmed wildlife populations but also released huge volumes of greenhouse gases into the atmosphere. In turn, rising temperatures and extreme weather are increasingly damaging biodiversity.

“Humanity has a global responsibility to address these two challenges and the interactions between them.”  - UNESCO

While the concept of an imbalance between society’s extraction of value from nature, and its negative feedback into it, is not new, the idea that it is becoming a limiting factor on global economic growth is only just being explored. In 2021’s ‘The Economics of Biodiversity: The Dasgupta Review’, the authors explore the tipping point reached in the past few decades at which humankind’s ecological footprint began to exceed the biosphere’s ability to regenerate valuable material, such as timber, clean water, and minerals.

‘Efficient interaction with nature’ is key to the ongoing health of the planet and it is also an increasingly important input into sustaining economic growth. This is a wholly new dynamic and underlines the imperative for directing more capital to solutions providers across the nature and climate space.

“It is a fundamental misconception of economists that we can continue to rely on models of growth and development in which our impact on the biosphere is of second-order importance.” - The Dasgupta Review

Investing in solutions

Significant capacity lies with sustainable investors to tackle both the climate and nature crises in mainstream portfolios, via, for example, identifying areas of exposure to the risks of biodiversity loss and employing engagement strategies to mitigate these risks. Risk mitigation strategies such as these have been given a boost by initiatives such as the Task Force for Nature-related Disclosures (TNFD) and the incipient Nature Action 100 engagement programme, both of which follow in the footsteps of their climate equivalent and set out to tackle biodiversity loss via investor stewardship and improved financial disclosures.

However, these are likely to be long-term and possibly slow-moving initiatives. Impact investing has an important and complementary role to play, stepping into the gap to develop and scale the transformative solutions needed to address these challenges. Engaging with the laggards without supporting pioneering solution-providers will only do part of the job needed.

The solutions are broad ranging and can be targeted to tackle both climate and nature. Often, they will do both, which we believe enhances both their societal importance and their long-term value. Examples include agricultural innovations to improve the efficiency of farming practices, which reduces the use of fertilisers, lowers greenhouse gas emissions and improves soil biodiversity; pioneering recycling infrastructure that can limit the carbon-intensive extraction of primary raw materials while also tackling marine plastic pollution; cold-storage solutions which reduce greenhouse gas (GHG) emissions from food waste while alleviating the pressure to farm so-far unexploited land; and techniques to manage sustainable forestry more effectively, sequestering carbon and enhancing biodiversity. 

“Ecosystem services and nature-based solutions, which depend on healthy biodiversity, make essential contributions to climate change mitigation and adaptation, and are effective vehicles for transformational change.”

An investment approach that explicitly targets both climate and nature holds important and differentiating characteristics compared to climate-only approaches. For example, in tackling climate change, we need to ensure that we are not inadvertently aggravating biodiversity, such as by creating monoculture forestry plantations that can act as valuable carbon sinks, but are devoid of biodiversity, as well as being more vulnerable to the effects of extreme weather.

This focus on the net-positive impact, which is characteristic of impact investment strategies, can provide opportunities for engagement with investees. Engagement is area of high priority for impact investors, reflected in the FCA’s recent guidance for a ‘sustainability impact’ label in the UK, which highlights ‘investor contribution’ as a crucial aspect alongside the impact generated by the underlying company. 

Some holdings will balance the issues of climate and nature without the need for engagement, but there will be instances where the 'Nature footprint' of companies that are primarily providing climate solutions will benefit from active engagement. Examples include engaging with utilities providers on the biodiversity impacts of offshore wind and hydropower generation; managing and mitigating GHG and non-GHG emissions from the manufacture of climate-friendly insulation materials; and wastewater management improvements at recycling facilities for sustainable packaging materials.

The SDGs provide investors with a useful supplementary framework for evaluating the impact of companies on societal climate and nature-related goals. In particular, SDG 14 (Life below water) and SDG15 (Life on land) focus directly on the conservation and preservation of nature and biodiversity. However, many other environmental SDGs, including SDG 7 (Affordable and clean energy), SDG 9 (Industry, innovation and infrastructure), SDG 11 (Sustainable cities and communities), SDG 12 (Responsible consumption and production), and SDG 13 (Climate action), all explicitly cover climate and nature-related targets and metrics.

The SDG Reckoning report – an update on progress towards the SDGs

When it comes to achieving the SDGs, the world’s ambition is not currently being met by its actions. In the annual SDG Reckoning report, published by our parent company M&G plc, we assess the progress towards each of the 17 SDGs, both from a general perspective and through an impact investing lens.

Read the report

Please note that, while we support the UN SDGs, we are not associated with the UN and our funds are not endorsed by them.

¹Reuters, ‘This year 'virtually certain' to be warmest in 125,000 years, EU scientists say’, (reuters.com), November 2023.
²Millennium Ecosystem Assessment, ‘Current State & Trends Assessment’, (millenniumassessment.org), 2005.