Knowledge. Shared Blog
December 2019
Market GPS: Sustainable Equities in 2020 and Beyond
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Hamish Chamberlayne, CFA
Head of SRI | Portfolio Manager
In an era defined by significant environmental and social issues, we see a close link between sustainability and innovation. Hamish Chamberlayne, Head of Sustainable and Responsible Investing, explains why it makes sense to focus on companies that are on the right side of both trends.
Key Takeaways
- In a time of rapid change, some companies are generating wealth while others are struggling to grow, often because they are on the wrong side of innovation and sustainability trends.
- The two key investment trends we see are the transition to a low-carbon economy and the fourth industrial revolution: the increasing penetration of technology into all aspects of our economy.
- In our view, companies that are innovating and contributing to the development of a sustainable global economy will represent areas of opportunity in 2020 and beyond.
What opportunities do you see in global equities in 2020?
Hamish Chamberlayne: I know we are late in the economic cycle, but there are still companies which are growing and innovating at a very compelling rate. And, I think this is really sort of … when we look at the world today, what we see is a two-speed economy. And we don’t have the conditions of a rising tide lifting all boats. Rather, we believe we are living through this era of incredible change, and that is really defined by large environmental and social trends and issues. And we believe that focusing on these big environmental and social trends is really going to help make better investment decisions, and it is also really characterized by, or aided by, technology. And I think it is very true to say that technology is having an enormous impact on every aspect of our lives now. Not just in the way that we communicate, but in the way that we bank for financial services, in the way that we use our assets, in the way that we organize all aspects of our personal life.
And we see a very close link between sustainability, growth and innovation. And in this two-speed economy, there are a collection of companies which are growing and innovating, and there are some companies on the wrong side of these trends which are struggling to grow.
So, taking a step back and thinking about global equities and the outlook for global equities, when we look at the macroeconomic environment, we often think that central bankers are really prisoners of the aggregate statistics; that there are these companies which are growing and succeeding and generating wealth, and then there are these companies which are on the wrong side of some of these trends, and which are struggling to grow and which are declining. You put these two sets of companies together and you get low overall economic growth, and central bankers are struggling to raise interest rates. But that is actually an incredibly favorable investing environment for companies which are growing.
What key investment themes are you focused on?
So in terms of the key themes are two huge investment trends. One is the transition to a low-carbon economy. And we believe this really makes a very, you know, good … this makes good investment sense to have a low-carbon approach to investing. There is going to be a huge amount of change and disruption associated with this generational investment trend.
The other trend is the fourth industrial revolution: this increasing penetration of technology into all aspects of our economy. We actually think that looking at portfolio risk management through a sector lens is not particularly helpful these days. The reality is that technology is penetrating all aspects of our economies. We see companies focusing on financial services, or we see health care technology, or we see manufacturing technology, or we see architecture and design technology.
And so I think that is going to be a key theme as we go into next year, is seeing these companies that are continuing to grow, continuing to innovate.
So, in summary, we still see a lot of opportunities – companies which we think are producing goods and services that are of benefit to the development of a sustainable global economy. And, fundamentally, we believe this just makes good investment sense to invest in these companies which are growing, which are compounding wealth and which are constructing the economy of the future.
Which market trends should investors
watch in the year ahead?
Explore Market GPS: Investment Outlook 2020
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