Friday 14/06/2019

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Earth Overshoot Day - ever earlier

Responsible Investment Strategist

Since last Monday, 8 August 2016, we have been consuming more natural resources than our planet is able to generate. Specifically, Earth Overshoot Day is the day on which we have consumed all the natural resources produced by our planet during one given year. This date is calculated based on more than 6,000 pieces of data, mostly obtained from the United Nations.

Ever earlier

Earth Overshoot Day has been arriving earlier and earlier each year. The concept was launched in 2006 in partnership with the NGO WWF, and at that time it occurred in the autumn, in October to be precise. Our deficit has substantially increased since, and this year the date was another five days earlier than in 2015, when it happened on 13 August. In fact, in order to meet the consumption needs of the global population it would take the natural resources produced by 1.6 planets.

However, contrary to fixed-income debt, for which restructurings and defaults are feasible (Greece and Argentina being top of mind), we only have one planet, and so no plan B.

The NGO responsible for the methodology is relatively optimistic about the positive impact the climate agreement reached in Paris in December 2015 may have on delaying Earth Overshoot Day. As a matter of fact, carbon emissions are said to account for more than 60% of the natural resource demand on our planet. The historic agreement between 157 countries to significantly reduce these emissions, in accordance with the objective to limit global temperature rise to 2° C compared to pre-industrial levels, should lower this demand and hence result in an Earth Overshoot Day occurring later on in the year.

While it is clear that consumers have a key role to play here with regard to natural resource demand that is driven by their behaviour, political will is key to significantly reducing the pressure on our planet.

Belgium: a country with a major biocapacity deficit

When one compares natural resource demand to supply, Belgium is among the countries with the highest biocapacity deficit. This poses a clear risk with regard to biodiversity, water supply and climate change.

Source: Global Footprint Network

Global Footprint Network: an NGO committed to the subject

Global Footprint Network is an NGO which focuses on the carbon footprint of countries. We have already had the pleasure of discussing the related economic challenges with their experts, in particular during the SRI week held in Paris last year [see Petercam Blog].

In line with this we are currently working with the NGO to improve the methodologies applied to carbon footprint calculations for sovereign bonds. This follows on from the fact that investors are requiring ever-greater transparency as regards the environmental impact of their portfolios. The carbon footprint of companies is being increasingly assessed, but this approach is even more complex when it comes to investing in sovereign bonds.

In keeping with our aim to improve our sustainability models, it is an honour to be able to work with subject experts as well as other investors. By doing this, we continue to increase the knowledge of the risks and opportunities presented by today’s challenges.

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