Long-term Investment Outlook 2023 (Triodos Bank)

Summary

• The global economy faces a polycrisis arising from interconnected ecological, economic, and social-political strains after ending a 40-year period of macroeconomic moderation.p.6
• Transgressions of planetary boundaries expanded from 4 out of 9 in 2009 to 6 out of 9 in 2022, placing global climate mitigation on a path toward 2.6 degrees of warming.p.9
• Over the past 30 years, income and wealth inequality grew significantly, with the top 1% of the population being responsible for 25% of global emission growth.p.8
• Addressing the polycrisis requires driving five interconnected transitions across food, resources, energy, social structures, and individual wellbeing.p.10
• Building economic system resilience requires applying six structural principles: Redundancy, Diversity, Dispersity, Autarky, Adaptability, and Transformability.p.11
• As of 31 December 2021, Triodos Investment Management managed €5.9 billion in total assets under management across impact investment strategies.p.16

Key insights

1. Asset manager capitalism has resulted in a fragile financialised economy where dominant financial owners prioritise short-term returns over long-term stability.p.5
2. Economic activity losses from recent global crises, including the 2008 financial crisis and COVID-19 pandemic, have become permanent structural losses rather than temporary dips.p.7
3. Unchecked material growth pursuit has stalled overall progress on the Sustainable Development Goals while causing a decline in the Human Development Index.p.8
4. Exceeding 1.5°C of global warming risks triggering multiple irreversible climate tipping points across ecosystems.p.9
5. Conventional engineering resilience focuses narrowly on bouncing back to equilibrium, whereas broader system resilience enables structural transformation.p.11
6. Dispersity across production networks and food or energy supply chains is essential to prevent single geographic shocks from causing full economic disruption.p.12
7. Investors must reorient their framework from standard long-term risk-return profiles toward impact-risk-return aligned with real-world transition principles.p.14