What sustainability is, and how you can make an impact
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What sustainability is, and how you can make an impact

Sep 2022
Jun 2021
sustainability, impact investing, ESG

More than ever before, we're becoming hyper-aware of the environmental, economic, and social issues plaguing our planet. And with that awareness, the sustainability movement efforts to slow down and rectify environmental damage has entered the mainstream.

For some of us, sustainability can take the form of recycling, going zero waste, or switching to electric vehicles. But for others, there's still a lot of confusion about what sustainability really is. The concept can feel vague and distant, and it can be challenging to actively practise a sustainable lifestyle.

So, here we'll break down what sustainability means and how you can effectively and significantly contribute to sustainability.

What is sustainability?

Sustainability is defined as actions and processes that help maintain the ecological, social, and economic balance so that our children and grandchildren can meet their needs the way we can meet our own today.

This could mean making sure that our natural resources aren't depleted, reducing our carbon footprint, and maintaining biodiversity in our forests and oceans.

On the social front, sustainability involves ensuring people have access to basic necessities, are able to earn a living wage, and are protected from discrimination.

Sustainability isn't exactly a novel concept; throughout history, sustainable development went from a fringe matter to a central global topic. Though much of the conversation about sustainability centred on climate change.

The First World Climate Conference in 1979 was the first major international meeting about climate science that paved the way for future international discourses about climate change.

As climate awareness continued to gain traction, the Rio Earth Summit saw 154 nations signing an international treaty to address climate change in 1992. Then, the Kyoto Protocol, signed in 1997, extended on the Rio Summit and saw countries pledging to reduce greenhouse gas emissions for the first time.

Most recently, 196 states committed to mitigating climate change through more comprehensive plans for emission reduction than ever before in the 2016 Paris Agreement.

Singapore is one of the states that signed the Paris Agreement.

Sustainability in Singapore

Singapore's sustainability efforts have generally been in line with global trends. But the vision of a "green city" has always been part of this country's DNA.

In 1967, Prime Minister Lee Kuan Yew unveiled plans to transform Singapore into a city with lush greenery and a clean environment. By 2014, Singapore successfully planted 1.4 million new trees in line with that vision.

Some would argue that Singapore is ahead of the curve with its sustainability efforts. Singapore is among the 20 most carbon-efficient countries in the world and 95% of the country's electricity is generated with natural gas.

Sustainability in Singapore - Water

As a small island that's vulnerable to rising sea levels and unpredictable weather patterns, sustainability is central to the national agenda. In 2021, the government announced the Singapore Green Plan 2030. The plan addresses climate change through infrastructure and grassroots initiatives. For instance, the government has committed to set aside S$30 million for electric vehicle initiatives, S$60 million to enhance local food production and supply, and S$50 million for community-led environmental projects.

But beyond these initiatives, the government also sees the need to incentivise investors and develop the green finance space.

For instance, the Monetary Authority of Singapore developed the Green Bond Grant scheme and has created a US$2 billion green investments programme (GIP). Both of these schemes allow investors to put their capital in projects and investments that have a strong sustainability focus.

Still, more can be done to rehabilitate and preserve our environment and our society. Singapore is also the regional leader in oil and gas refining, an industry that's a major contributor to the climate crisis. And though carbon emissions were greatly reduced in the wake of the Covid-19 pandemic, the staggering use of disposable face masks added to the plastic waste worldwide.

disposable face masks adding to the plastic waste worldwide

To that end, we don't have to depend on the government to bring about change. In fact, as individuals, we have a lot more power to influence change.

At this point, you might be thinking, "How can I be more sustainable?"

How you can influence effective, significant change

There are a number of ways that we can become more sustainable, from the smallest of acts — bringing your own reusable bags to the grocery store — to the bigger and more impactful contributions — investing in businesses and institutions that fight for the causes we care about.

So how can we make our dollars speak for us?

We can start by paying attention and lending support to businesses and initiatives that are making an effort to reduce their waste and emissions. We can buy products from these businesses as consumers, or even invest in them as a shareholder.

For instance, given that 24% of direct CO2 emissions from fuel combustion is caused by transportation, you could consider switching to an electric vehicle to reduce your carbon footprint. And you may choose to own electric hybrid vehicles or even go full electric eventually with a Tesla car. In addition to supporting the electric vehicle (EV) business as a consumer, you can also invest your dollars in the industry to help these companies develop and improve their products.

As a result of the growing demand for electric vehicles, EV companies such as Tesla have seen a growth in value. In January 2021, Tesla's market cap grew to US$820 billion, surpassing Facebook to become the fifth biggest company in the US.

And Tesla doesn't just produce a sustainable end-product (that is, energy-efficient cars) — it also tries to make its entire manufacturing process as resource-efficient and sustainable as possible. For example, the company makes an effort to build new manufacturing plant that rely on renewable energy source

While EV manufacturers, even Tesla, still can improve their sustainability efforts, they're leading the way forward through innovating processes and finding alternative ways to solve the global problem of climate change.

As more capital flows into companies that prioritise sustainability, the reality that shareholders care about their impact can also move companies and industries that weren't traditionally sustainable to step up. For example, after a group of investors pressured HSBC to toughen its stance against fossil-fuel financing, HSBC began to phase out its exposure to the coal industry in March 2021.

Simply put, we can make a significant difference. And we can make that difference by being deliberate about where we choose to invest our capital and resources.

Enter ESG investing

There are a variety of ways to invest responsibly. Some people choose to completely avoid companies that don't align with their values (think avoiding tobacco companies). Some investors actively invest in companies that have a lower carbon footprint compared to their peers. But these approaches may come at the cost of your performance goals of returns.

A more fruitful approach is investing in companies and funds that consider ESG (environmental, social and governance) factors as part of their traditional financial framework. This means considering not just the fund's sustainable practices from a moral standpoint, but also a risk-return standpoint.

Since 2020, the ESG investing space has exploded, with over US$51.1 billion inflow of new capital, according to Morningstar. ESG investing can be your way of contributing to making a significant impact on the planet while also making sure that your financial future remains intact.

But with more fund managers offering sustainable funds, it can be difficult for an investor to distinguish between funds that are actually sustainable, from funds that are just greenwashing.

The Endowus team rigorously assesses fund managers to ensure that the ESG factors of the funds selected meet global sustainability standards. You can even directly see the impact of your sustainable investments through our ESG portfolios.

If you simply invest S$100 in an Endowus ESG portfolio, the amount of carbon emissions avoided each year is equivalent to about 14.5km driven on a car, or 1.8kg of coal burned, or 463 mobile phones being charged (equivalent to 295 days of video views). Refer to the full disclaimer for our carbon emissions calculator at this link.

To get started with Endowus, click here.

Find out more about the subtle differences between ESG investing, socially responsible investing (SRI), and impact investing.

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