AB: Responsible Investing: Four Themes To Follow in 2024 - Seite 2

One aspect of biodiversity in particular-water-will be at the forefront of investors' minds, and ours as well, over the next few years as communities, companies and countries cope with risks around water scarcity, water pollution and sustainable water management.

Our research into biodiversity and nature-related financing aims to help investors understand, analyze and manage biodiversity risks and opportunities, as well as get a handle on investing solutions such as so-called debt-for-nature swaps.

These structures require careful evaluation but may help indebted developing countries protect their vulnerable ecosystems. Debt-for-nature swaps are a type of blended finance structure that brings together emerging-market governments, developed-market governments and private investors to lower the cost of financing for the issuer and the credit risk for the investor, and to increase the flow of capital for sustainable investment.

The United Nations Environment Programme estimates that developing countries will need up to US$366 billion annually in adaptation financing such as blended finance structures. Carbon markets, too, are becoming more universally endorsed as a critical step toward decarbonization.

2. Workforce disruption and transformation.

As responsible investing evolves to reflect real-world complexities, our understanding of social factors is also deepening. One such area of focus is transformation of the labor force. We want to understand the implications of aging demographics and deglobalization; the benefits of a more diverse and inclusive workforce; and the impact of disruptive technologies such as generative artificial intelligence (AI).

Generative AI offers tremendous opportunity for investors and for society-for how we work, study and live. But it also comes with significant social risks. For example, AI may accelerate trends in automation; as much as 30% of working hours in the US could be lost to automation by 2030. Generative AI is also an energy hog, owing to its computational power requirements. Companies that help solve this energy conundrum could enable a sustainable future for this burgeoning technology-and create opportunities for investors.

We're developing insights into how companies can navigate and leverage AI responsibly, as well as how investors can incorporate these considerations into the investment process.

Another workforce issue we're researching that could have material implications for investors involves a secular shift in the psychological contract between employers and employees, with an increased focus on worker expectations and a rise in collective actions and unionization. This shift in the balance of power between labor and capital goes hand in hand with the decline in working-age populations in many countries and the fragmentation of the labor force via deglobalization.