Cutting through the hype: A realistic assessment of sustainability


It was Winston Churchill who said: “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” I used to be firmly in the optimist category. Problem? Face it head on! Something wrong with the system? Change it from the inside! But what has been achieved so far when it comes to sustainable development? I am slowly becoming more pessimistic, and here’s why.

First, take climate change. Despite efforts to move to cleaner technologies in producing energy, and despite a global pandemic that caused global emissions to go down for one year, CO2 emissions are back at pre-Covid levels. The carbon intensity of our economies has decreased but, due to economic growth, emissions are still increasing.

The Intergovernmental Panel on Climate Change (IPCC) report that was released last year states: “We are not on track in tackling global warming – despite having the tools and know-how.1 With the right leadership, the world can avoid dangerous climate change.”

That leadership was somewhat lacking at the COP27 climate summit in late 2022. The summit did deliver a few wins, including plans to create a fund for developing countries to finance decarbonisation, but was disappointing overall. Climate policies still fall short. If all plans are met, the summit leaves us heading for 2.5 °C of global warming. And since the plans have not been met to date, why should they now?

Mixed picture on the SDGs

Looking beyond climate change to a broader set of Sustainable Development Goals (SDGs) through the lens of the United Nations (UN) SDGs, there is a mixed picture. The 17 goals ranging from eradicating poverty and inequality to building the infrastructure for a sustainable future were established in 2015 and are supposed to be achieved by 2030.

At half-time, we’re still nowhere near meeting them, and indeed progress actually went backwards during Covid. The headway made since 2015 has been too slow, and no country is on track to achieve the goals by 2030.2

What is now particularly worrying are the negative trends on the environmentally focused SDGs. If we do not address climate change and halt the loss of biodiversity embodied in three of the goals, it is unlikely that we will achieve any of the other SDGs, given that all social systems depend on the natural environment.

And there are contradictions between the goals. For example, solving SDG 2 to end hunger and ensure year-round access to safe and nutritious food will be difficult to achieve while also simultaneously solving SDG 15. This seeks to ensure the conservation, restoration and sustainable use of forests, wetlands and drylands – growing more food makes this much less likely.

We need external costs to be priced better

So, should we therefore be downhearted? In recent years, the financial sector has woken up to ‘sustainability’, and focused on integrating financially material ESG factors into portfolios, to make better-informed investment decisions. That’s now in the mainstream and is highly positive.

However, there are two issues with this. The Intergovernmental Panel on Climate Change (IPCC) mentions in its report that climate risk remains underpriced in financial markets, and this also goes for other ESG externalities such as the loss of biodiversity, poor labour conditions, poor governance and poor community relations.

This could be solved by better global regulation, which puts a price on these issues and makes sure that investors and corporates internalise these external costs. If not, then while ESG integration will still help to make better investment decisions, it would not directly benefit sustainable development.

Moving to impact investing

What the investment community is doing now is trying to find a way to go beyond standard ESG integration and move towards impact investing, creating structures that can fund the trillions of dollars in investments needed. A start was made at COP27 with the creation of a loss and damage fund by wealthier countries, but this still needs to be made operational.

Green, social and sustainability-linked bonds are also good instruments for large investors to create an impact on the ground. While this looks promising, only a very small part of all assets under management goes to directly funding (corporate) projects that help sustainable development, so we’re not there yet either.

My glass is still half full

It is good to let my pessimistic self out for a change, however I have to note that we, as investors, companies and governments, are still trying to construct the tools capable of making our global practices more sustainable. It is time now to start allocating our resources and focus on building those tools, and to shift away from the hype of campaigns, reassuring rhetoric and the creation of unreachable goals and targets. And whereas COP27 left us heading for 2.5 °C of global warming, five years ago, we were heading for 4 °C.  

So, to end with another quote from Churchill: “For myself, I am an optimist – it does not seem to be much use to be anything else.”

Masja Zandbergen, Head of Sustainability Integration, Robeco