Insights from COP28: How to invest for a better world

'In a post-COP28 world, it would benefit the investment managers to zoom in on sustainable investment strategies that put ESG first', writes Dr Ana Nacvalovaite

The 28th Conference of the Parties (COP28) has been an eye-opening moment in our global environmental discourse. Hosted by one of the wealthiest oil-based economies in the world it still managed to offer stong positive insights into how the investment management industry can catalyse global economic growth and stability going forward.

Finance Day has brought forward the significant role that seamless capital flow across borders has played and will continue to in driving economic prosperity, fostering global stability, and uplifting communities.

Click here for ESG Clarity‘s COP28 coverage.

The power of capital flow across borders has few limits, with exceptions of sanctions of course. International investments are not just financial transactions; they’re catalysts for economic stimulation. For instance, when developed countries invest in emerging markets, it can lead to the creation of new industries and job opportunities, thereby boosting local economies.

A prime example is the investment in renewable energy projects in Africa, which has not only created jobs but also contributed to sustainable development and economic growth. At COP28 there was a strong presence of African financial institutions and an iron commitment to invest in renewable and green energy on the continent. The president of the African Development Bank, Dr Akinwumi Adesina said Africa can achieve wealth creation through a green transition and investors had every reason to look at opportunities in Africa.

Naturally, diversified investments act as buffers during economic downturns. By investing across different geographical regions and sectors, investors can mitigate risks associated with market volatility. This always contributes to the overall stability of the global economy. For example, investments in microfinance institutions in Southeast Asia, are creating opportunities for small entrepreneurs to access capital, leading to community-level economic growth and improved living standards.

This leads to financial inclusion of individuals and businesses, regardless of their net worth or company size, and allows them to have access to useful and affordable financial products and services. Such inclusivity is essential for reducing poverty and achieving equitable growth. Still far too many areas, especially in developing countries, face significant barriers to financial inclusion, including limited access to banking services and regulatory challenges. Investment managers can contribute by encouraging focus on developing financial solutions for underserved markets, thereby enhancing access to financial services. A strong example is the growth of mobile banking in Kenya, which has revolutionised financial access, enabling small-scale entrepreneurs to thrive.

Investment empowers communities and access to finance enables people in underserved areas to start and grow businesses, invest in education, and improve their living conditions, amongst many other benefits. Investment in entrepreneurship and education is the foundation of opportunity creation globally. In communities the beneficial ripple effect such as job creation, increased income, and improved social outcomes, food and water security and access to healthcare means welcome change at every level. 

In the post-COP28 world it would benefit the investment managers to zoom in on sustainable investment strategies that put ESG first. Driving innovation in financial products which cater to the unique needs of diverse communities, aligning with global sustainability goals (SDFS 2030).

It is obvious that there’s a need for collaboration between governments, financial institutions, and investment managers to realize broad economic objectives and SDGs. COP28 has shown the significant role of the investment management industry in leveraging finance as a tool for global development and stability. It is now up to us to ensure we come together to build and implement solutions, not divide and conquer.