Why now?

Earth MattersWith almost eight million people worldwide taking to the streets in September 2019’s global climate protests, addressing climate change and other environmental issues has never seemed more urgent. Increasing levels of economic activity, supported by centuries of burning fossil fuels, has created significant stress across the world’s environmental resources, necessitating profound changes to modern society if we are to keep warming below two degrees Celsius, as agreed in the 2015 Paris Agreement. These sustainable innovations will change the face of industries across the planet, which creates the potential for both winners and losers, making this a key area of interest for active investors.

What does it mean to think green?

 

Earth matters considers a wide scope of environmental concerns, including clean energy, efficient infrastructure, electric vehicles and the ways we manage resources at all stages of their life cycles, among other concerns. We also evaluate these ideas through the impact this is having on government policy, corporate strategy and consumption behaviour. Some examples of things to consider include that:

 

  • Global fresh water demand far exceeds supply and that agriculture currently consumes 70% of global fresh water. By 2050, 50% of all global crop yields could be at risk from water reserve depletion
  • Millions of people die each year in India and China from pollution-related deaths
  • The oceans are straining under the weight of the eight million tonnes of plastic that deposited annually into our seas

Who might triumph?

However, there are companies trying to solve these problems – and we want to find them. On a greener, cleaner planet, we believe that winners could include companies able to innovate and provide new products and services that mitigate environmental pressures. Losers could be established companies who do not adapt their business models or face rising financial/reputational risks due non-compliance with environmental policy. By analysing our investments through an environmental lens, we believe we put ourselves in the best position to identify opportunities in a world going green.

Meet the team

We have a research group for each theme, made up of analysts, portfolio managers and other members of the investment team, that collaborate on new thematic ideas and analysis. Here are the co-leaders in the Earth matters theme group.

Our key areas of focus

Clean energy:

As the world's energy consumers – from individual households to large-scale industry – increasingly move away from more outdated fossil fuels, opportunities will exist for those providers offering competitive, scalable, and environmentally sustainable energy sources. Providers of cleaner/renewable energy sources continue to receive subsidies and incentives in a bid to achieve accepted emission targets.

Efficient infrastructure:

From the humble LED to the burgeoning Chinese smart power grid, at every point on the spectrum, policymakers and companies are seeking means to derive and use the most efficient and environmentally friendly methods to power the world.

Electric vehicles:

The automotive industry has been undergoing considerable change, with little sign of deceleration. Increasing knowledge of the impact of the traditional internal combustion engine on the environment has led to a noticeable shift in consumer auto preferences and government policy, with EV penetration set to rise in the coming years. The growing adoption of EVs has far-reaching implications for a number of sectors beyond the automotive sector, including chemicals, mining, metals and technology.

Resource management & recycling:

Growing end-user and policymaker awareness of harmful waste products and poor recycling practices has given rise to a new regulatory environment, in which depositors of harmful waste (particularly plastics) are facing increasing pressure to reform current, unsustainable standards. The beneficiaries in this evolving marketplace will most likely be those capable of remedying outdated, harmful, and unpopular means of production and distribution.

A deep dive into…

Low productivity

Despite being one of the largest sectors globally ($8.5Trn) and continuing to grow at 4% CAGR, Construction is a sector that has seen the lowest level of digitization and low productivity with little progress over the past 20 years.

Of course, our themes don’t exist in a vacuum

Consumer power

In a show of consumer power, consumers are starting to demand sustainability from companies, making businesses everywhere re-evaluate their messaging.

Population dynamics

Our planet is being placed under strain as populations in emerging economies become wealthier and more urbanised, which links to our population dynamics theme.