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Global megatrends

How climate, nature and social change will reshape economies

Climate change, natural resource scarcity and social shifts are transforming the corporate landscape. Investors need to understand the implications of these sustainability megatrends to manage risks and seize opportunities.

Read this article to understand:

  • How global megatrends are reshaping the investment landscape
  • The investable opportunities related to climate change, natural resource scarcity and social change
  • How the megatrends connect

Investors hoping to successfully navigate the challenges of the coming years will have to pay close attention to megatrends – the seismic and interconnected changes occurring across economies and societies.

The megatrends encompass major global themes, from technological progress to shifting geopolitical power dynamics. But the most transformational megatrends include those relating to sustainability: the climate crisis, resource scarcity and demographic and social changes, such as rising inequality.

Driven by a mixture of regulation, technology, consumer behaviour and environmental conditions, sustainability megatrends affect every company in every sector. Firms that can transition their business models in line with these forces, or offer innovative solutions amid the disruption, should be well-positioned; those that cannot risk obsolescence, if not oblivion. In this article, we explore the risks and opportunities for investors.

Climate change

Start with climate change. Without decisive action, the world looks likely to miss the Paris Agreement target of limiting temperature increases to well below two degrees Celsius above pre-industrial levels (and ideally 1.5 degrees). The physical impacts of climate change – from floods to wildfires and searing heatwaves – are already affecting companies across the world and will only become more severe.1

The physical impacts of climate change are already affecting companies across the world

But climate change will have much wider implications. New regulation is damaging the revenues of carbon-intensive businesses. Improvements in technology and increasing investor focus on environmental, social and governance (ESG) factors are influencing the corporate landscape in myriad ways.

Climate mitigation

Climate mitigation is the effort to reduce or eliminate greenhouse-gas emissions. The key driver here is policy: governments are likely to expand existing carbon-pricing programmes and introduce other regulatory measures to meet climate targets.

Figure 1: Scenarios for climate policy, emissions and temperatures

CO2 emissions by scenario

How carbon prices may develop under different climate scenarios

Note: Full explanation of these scenarios is provided in the references, below.
Source: Network for Greening the Financial System, September 2022

Revenue streams among carbon-intensive businesses can be wiped out at the stroke of a legislator’s pen. Restrictions on the most polluting activities are already being enacted, threatening industries such as air travel and aviation freight.3

As well as wielding the stick against laggards, politicians are increasingly offering carrots to companies leading the way on climate mitigation. Take the US government’s Inflation Reduction Act, an ambitious package including $370 billion in subsidies for green energy. Among the beneficiaries will be specialists in solar and wind power, but also providers of parts and services across infrastructure supply chains.4

A mixture of fiscal sweeteners, falling costs and evolving consumer preferences is boosting the fortunes of several sectors, including electric vehicles. But the effects of these developments are radiating far beyond “green” sectors most obviously aligned to the climate transition. Take mining companies, which are seeing surging demand for the metals required for the technologies that enable electrification, such as copper and lithium.

Climate adaptation

Even under the most ambitious mitigation scenarios, the negative effects of climate change will become more pronounced over the coming years, especially in the Global South. Adaptation is imperative.

Despite this, only a fraction of the damage caused by storms, floods and wildfires is currently insured (see Figure 2). The increased likelihood of extreme weather events will raise the level of risk in insurance contracts and allow some insurance and reinsurance companies to benefit from higher pricing.

The increasing frequency of heatwaves and droughts means water security has become another crucial investment theme

The increasing frequency of heatwaves and droughts means water security has become another crucial investment theme. As climate change contributes to greater water scarcity, water utilities and companies working on desalination or water re-use technologies could be well positioned.

While droughts hit in some areas, others will be inundated as sea levels rise and flooding events become more frequent. New building methods and infrastructure are needed to protect low-lying towns and cities. Design and engineering companies with expertise in adaptation, along with firms developing resilient and sustainable building materials, will be able to offer solutions.

The world also needs to adjust in other, more surprising ways. For instance, evidence suggests warming temperatures may prolong breeding seasons for certain pest species, damaging crops but boosting growth in the $22 billion global pest-control market.5

Figure 2: Total climate-related damages and those covered by insurance, 2000-2022

Source: Environmental Research, June 28, 20226

Investable themes related to climate change

Investable themes related to climate change

Climate mitigation

  • Decarbonisation of transport:
    • Opportunities: EVs, batteries, fuel cells, rail, traffic software, electrification of flight
  • Decarbonisation of energy:
    • Opportunities: Electricity infrastructure and value chains, nuclear, hydrogen, mining for rare earths
  • Improvements in efficiency across industry and the built environment:
    • Opportunities: Industrial ICT, energy management in buildings

Climate adaptation

  • Need for greater water security
    • Opportunities: Utilities, desalination, water re-use
  • Transition to climate-friendly agriculture
    • Opportunities: Biotech, chemicals to improve yields
  • Rising sea levels
    • Opportunities: Aquaculture, sea defences, infrastructure construction
  • Rising temperatures
    • Opportunities: Treatments for water-related diseases and illnesses related to warmer weather; pest control as rising temperatures prolong breeding seasons
  • Increased frequency of extreme weather events
    • Opportunities: Insurance, reinsurance, microinsurance

Resource scarcity

While the threats of climate change are now relatively well understood, less attention has been paid to risks associated with the human destruction of nature.

Since 1970, there has been an average fall in global animal populations of 69 per cent, mostly due to human-driven habitat loss, pollution and global warming.7 This has devastated biodiversity: the delicate balance and complex variety of life on Earth. It has also brought serious risks to human civilisation, affecting the availability of the resources on which it depends.

Governments are belatedly moving to protect nature. Major economies have announced a “30-by-30” pledge to safeguard 30 per cent of land and oceans by 2030, along with a promise to increase funding for biodiversity issues. As momentum builds, the World Economic Forum (WEF) estimates the transition to a “nature-positive” economy could generate $10 trillion of business opportunities over the next decade.8

Sustainable land

Many industries share the blame for unsustainable land-use practices, but farming, particularly farming to produce meat, is the principal culprit. Inflicting further damage on nature through intensive farming will limit countries’ ability to produce the food required by growing populations.

Governments are under pressure to increase the food supply while curbing the worst climate and biodiversity impacts of agriculture. New regulation is in the offing: the EU’s “Farm to Fork Strategy” targets reductions in the use of pesticides (by 50 per cent), fertiliser (20 per cent) and agricultural antibiotics (50 per cent) by 2030.9

As these trends play out, companies whose products contribute to sustainable land use should benefit. WEF research suggests precision agriculture methods, which are less damaging to nature, could also improve productivity, boosting large-scale farm yields by 40 per cent over the next two decades.10 Companies such as industrial technology firm Trimble are seeing increasing demand for their products, including GPS sensors that enable tractors to deploy fertiliser more accurately.11

Firms that can demonstrably limit their impact on nature already benefit from government subsidies and are more likely to escape punitive taxes and regulation.12 At the same time, consumers are selecting foods produced without harming the natural world, fuelling demand for plant-based alternatives to meat and dairy, as well as organic produce.

Figure 3: Projected growth in alternative proteins

Note: H = High growth scenario. L = low growth scenario. Remainder are base case scenarios.
Source: FAIRR, October 25, 2022

Sustainable oceans

Greater awareness of damaging land use and extinction of terrestrial species is matched by public uproar at the effects of human activity on the oceans.

Tackling the causes of ocean pollution is another area of focus for politicians, businesses and consumers

Global seafood consumption is expected to be 18 per cent higher in 2030 than in 2018 and tackling the industry’s most damaging methods is a key priority. China, Japan and the EU recently banned certain fishing practices and tighter regulation is driving new innovations, notably in land-based aqauaculture, fish feed – based on insect and algal sources rather than other fish – and vaccines for diseases among farmed seafood species.

Tackling the causes of ocean pollution is another area of focus for politicians, businesses and consumers, with plastics the principal target. Retailers and manufacturers that reduce the number of single-use plastics in their products by shifting to other materials should avoid regulatory penalties and attract new customers. 

Figure 4: Plastics pollution (million metric tonnes)

Plastics pollution

Source: Aviva Investors, August 202214

The circular economy

These developments are driving a related trend – the circular economy. Predicated on the “three Rs” – the need to reduce, re-use and recycle materials to mitigate environmental damage – it is putting inefficient companies under the spotlight and creating opportunities for leaner disruptors.

The “three Rs” are putting inefficient companies under the spotlight and creating opportunities for leaner disruptors

Take the textiles industry, which faces pressure to change amid rising awareness of the wastefulness of “fast fashion”. Switching to a circular economy would not only reduce the industry’s emissions and impacts on nature – notably its vast water usage – but also bring down companies’ costs and reduce their exposure to price volatility.

Reducing or re-using materials is preferable from a natural capital standpoint, but more recycling will also be required if a circular economy is to become the norm across industries. Recycling facilities are due to see greater demand and alternatives to plastic, such as aluminium, may become the preferred option among businesses and consumers.15

Investable themes related to resource scarcity

Investable themes related to resource scarcity

Sustainable land

  • Growth of nature-friendly and precision agriculture:
    • Opportunities: Drone technology, geospatial data solutions, vertical farming, feed additives to reduce methane emissions from livestock, hazardous waste management
  • Growth in demand for sustainability information:
    • Opportunities: Providers of sustainability traceability, monitoring and verification
  • Growth in demand for alternative proteins
    • Opportunities: Plant-based proteins and lab-grown meat

Sustainable oceans

  • Growth in demand for sustainable seafood
    • Opportunities: Mariculture, sustainable fish feed, fish health
  • Increased regulatory and consumer pressure to reduce water pollution
    • Opportunities: Water treatment, smart sensors to reduce water leakage
  • Increased regulatory and consumer pressure to reduce plastic pollution
    • Opportunities: Recycling/biodegradable materials

Circular economy

  • Increased regulatory and consumer pressure to re-use materials
    • Opportunities: Sustainable packaging, waste treatment, durable consumer products, eco-design, aluminium

Demographic and social change

As well as environmental factors, megatrends also encompass societal changes. Demographics are shifting, with populations ageing in China, Japan and Western Europe.

Social and demographic forces are leading to changes in consumer attitudes

One of the most significant – and troubling – social trends relates to the unequal distribution of resources (see Figure 5). According to research from the Business Commission to Tackle Inequality, the richest ten per cent of the world’s population now owns more than three-quarters of total wealth, while the poorest half of the population owns just two per cent.16

At a deeper level, social and demographic forces are leading to changes in consumer attitudes, affecting the ways in which businesses operate. Companies that cut corners on employee protections or connive in human rights abuses across their supply chains are encountering new reputational hazards.

Figure 5: Rising inequality: average annual wealth growth rate, 1995-2001 (per cent)

Rising inequality

Source: World Inequality Lab, 202117

The transition to a more equitable society

Take the operators of the Dakota Access Pipeline in the American Midwest, who failed to consider how changing social attitudes would affect the project. When the pipeline encroached on indigenous rights and sparked an international outcry, the operating company and the banks that financed it were hit with reputational damage and billions of dollars in costs.18

This episode illustrates how heightened scrutiny and new expectations among stakeholders – including consumers, employees, civil communities, society and the media, along with greater “allyship” and coordination between growing social movements internationally – are starting to have a big impact on company revenues, in addition to tougher regulation on human rights.

Benefits are accruing to companies that take human rights seriously.

On the positive side, benefits are accruing to companies that take human rights seriously. Research from the UK Department for International Development finds compliance with labour standards improves firms’ positions in supply chains and that importers and buyers prefer doing business with suppliers with higher social standards.19

Similarly, companies now face higher expectations regarding their treatment of staff. Firms that offer low wages and poor working conditions are coming under pressure – takeaway company Deliveroo’s IPO was shunned by some socially conscious investors, for example  – while those that promote a decent working environment do better. Evidence shows a positive correlation between good treatment of employees and market performance.20

Solutions to social problems

As these trends play out, companies providing solutions to problems related to social inequality should see opportunities to improve their revenues while also contributing to broader economic gains.

One effective way to mitigate inequality is to improve access to vital resources. The World Bank has found well-designed financial products and services can bolster low-income families’ economic resilience by helping them to manage risks and deal with sudden changes in their circumstances.21 Companies that can provide products and services to underserved communities can reach new markets and tap growth opportunities while also promoting financial inclusion.

Companies providing products and services to underserved communities can reach new markets and tap growth opportunities

Access to education and skills training is another key theme. As climate change reshapes economies, and advances in artificial intelligence and other new technologies transform the working environment and threaten to exacerbate income and wealth inequality, firms that provide access to education, skills and retraining should benefit, especially as there is often a lack of public provision for these kinds of services. The wider economic gains could be vast: WEF research finds investment in employee upskilling could yield a $6.5 trillion boost to global GDP by 2030.22

Finally – and perhaps most important of all – is access to healthcare. The COVID-19 pandemic highlighted disparities in health outcomes both within and between countries: poorer communities in rich nations were more likely to get sick and poorer nations found it more difficult to obtain vaccines.23,24 Companies that can provide treatments to those who usually struggle to access healthcare are expected to see greater demand over the coming years, especially given the increasing likelihood of future pandemics and the projected rise in vector-borne diseases due to climate change.25,26

Investable themes related to demographic and social change

Investable themes related to demographic and social change

The transition to a more equitable society

  • Increasing focus on corporate responsibility to respect human rights
    • Opportunities: Companies that mitigate human rights risks and remedy harms through robust due diligence, build stronger reciprocal relationships with stakeholders, and provide greater transparency over business relationships and supply chains
  • Growing expectations on companies to promote decent work and equality
    • Opportunities: Companies that promote practices that support human capital development, through nurturing and developing people across value chains
  • Heightened scrutiny over companies’ role as corporate citizens
    • Opportunities: Companies to strengthen social contract by contributing positively to society through responsible tax practices and supportive progressive public policy efforts 

Social solutions

  • Growing demand for skills and development/education 
    • Opportunities for providers of education, re-skilling and training programmes as technology, climate change and the COVID-19 fallout disrupt workforces
  • Increasing need for financial security and resilience
    • Opportunities for providers of financial services and products to underserved groups to improve their financial security
  • Increasing need for inclusive healthcare
    • Opportunities for companies providing treatments and diagnostic services to populations as climate change creates new threats

How megatrends connect

Megatrends are not linear; they intersect in various ways. For example, global warming contributes to the erosion of natural capital and threatens the social wellbeing of communities least responsible for the problem, even as social objectives in advanced economies are achieved at the cost of transgressing environmental boundaries (see Figure 6).

Investors must be careful to ensure they are not aligning their portfolios with one megatrend while ignoring others

Trade-offs abound and investors must be careful to ensure they are not aligning their portfolios with one megatrend while ignoring others. By keeping track of the connections between the megatrends, investors can tap into a range of opportunities and identify companies that deliver solutions across climate, nature and society.

Megatrends could play out in unexpected ways or catalyse new, as-yet-unforeseen shifts. But a growing body of evidence points to the material salience of climate change, resource scarcity and demographic and social dynamics. Investors who can grasp the implications should be best placed to navigate the challenges and opportunities today and create resilient portfolios for tomorrow.

Figure 6: Developed economies (and some fast-growing emerging economies) have achieved social goals by transgressing ecological boundaries


Ecological boundaries - Malawi


Ecological boundaries - China


Ecological boundaries - US

LS = Life Satisfaction; IN = Income Poverty; DQ = Democratic Quality; LE = Healthy life Expectancy; EN = Access to Energy; EQ = Equality; NU = Nutrition; ED = Education; EM = Employment; SA = Sanitation; SS = Social support.

Note: Green wedges show resource use relative to a biophysical boundary associated with sustainability. Red wedges show shortfalls below the social threshold (in the middle of each circle) or overshoots beyond the biophysical boundary (on the outer edge).
Source: Nature Sustainability, 201863


  1. “AR6 Synthesis Report: Climate change 2023,” IPCC, March 2023
  2. “Fossil fuel subsidies in clean energy transitions: Time for a new approach?”, International Energy Agency, February 2023
  3. Lottie Limb, “It's official: France bans short haul domestic flights in favour of train travel,” Euro News, April 4, 2023
  4. “Global Equity Income Q&A: Richard Saldanha on dividends and downturns,” Aviva Investors, October 28, 2022
  5. Maxime Damien and Kevin Tougeron, “Prey-predator phenological mismatch under climate change,” Current Opinion in Insect Science, Vol 35, October 2019; Sizah Mwalusepo, et al., “Predicting the impact of temperature change on the future distribution of maize stem borers and their natural enemies along East African mountain gradients using phenology models,” Plos One, June 2015
  6. Ben Clarke, et al., “Extreme weather impacts and of climate change: an attribution perspective”, Environmental Research, June 28, 2022
  7. “Living planet report 2022,” World Wildlife Fund, 2022
  8. “New nature economy report II: The future of nature and business,” World Economic Forum, July 14, 2020
  9. “Farm to Fork strategy for a fair, healthy and environmentally-friendly food system,” European Commission, May 2020
  10. “New nature economy report II: The future of nature and business,” World Economic Forum, July 2020
  11. “New nature economy report II: The future of nature and business,” World Economic Forum, July 2020
  12. A policy to reward farmers with carbon credits for increasing the amounts of carbon sequestered in their soil has successfully been trialled in Australia, for example. See “New nature economy report II: The future of nature and business,” World Economic Forum, July 2020
  13. “Climate transition proteins: Flavour of the future,” FAIRR, October 25, 2022
  14. Full source details available in: “The Little Book of Data 5,” Aviva Investors, 2022
  15. “Circularity, consumers and change: Making the switch to sustainable materials,” Aviva Investors, November 3, 2022
  16. “Tackling inequality: An agenda for business action,” The Business Commission to Tackle Inequality, May 2023
  17. Lucas Chancel, et al., “World inequality report 2022”, World Inequality Lab, 2021
  18. Carla F. Fredericks, et al., “Social cost and material loss: The Dakota Access Pipeline,” First Peoples Worldwide, University of Colorado Boulder, November 2018
  19. Maho Hatayama, “Labour standards and firm growth,” Institute of Development Studies, October 25, 2018
  20. Aaron Bernstein and Larry Beeferman, “The materiality of human capital to corporate financial performance,” Harvard Law School, April 2015
  21. Asli Demirgüç-Kunt, et al., “The Global Findex Database 2021: Financial inclusion, digital payments, and resilience in the age of COVID-19,” The World Bank, 2021
  22. “Upskilling for shared prosperity,” World Economic Forum, January 25, 2021
  23. David Finch and Adam Tinson, “The continuing impact of COVID-19 on health and inequalities: A year on from our COVID-19 impact inquiry,” The Health Foundation, August 24, 2022
  24. Moosa Tatar, et al., “COVID-19 vaccine inequality: A global perspective,” Journal of Global Health, Vol. 14, October 14, 2022
  25. Alice Park, “Why infectious disease outbreaks are becoming so common,” Time, September 15, 2022
  26. “Biopharma, climate change and the rise of infectious disease,” Morgan Stanley, August 28, 2019

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