Adapt and Thrive
Invest in trends that will shape the world of tomorrow.
Unsettling reports from climate researchers and the scenario of an increasingly uninhabitable world have startled the public. Millions of mostly young demonstrators have mobilized in more than 125 countries to demonstrate every Friday and alert the rest of the population to take action.
The demonstrations are a reaction to the mounting evidence of global warming, with alarming consequences occurring right before our eyes: Heat waves, hurricanes, unmatched wildfires, and droughts are now more frequent. Water warms up and polar ice melts, the combination causes sea levels to rise, resulting in flooding and erosion of coastal and low-lying areas. At the same time, essential natural resources like drinking water become more and more polluted and scarce.
Scientific organizations are a strong voice in the chorus of protests: For instance, more than 28,000 scientists just across German-speaking countries signed a statement in 2019 declaring that the concerns of the protesting students are justified and supported by the best available scientific evidence.
3. World Meteorological Organization (WMO), UN 2018 IPCC report
The last of these facts is introducing a path to a potential solution: Thankfully, technology and new industries constantly evolve and can potentially mitigate the negative impacts of climate change and pollution. For instance, the exponential growth of renewable energy, driven by technological improvements over the past decade, can have a positive impact on the carbon footprint of businesses and private households. For a new installation, the cost of electricity of both wind and solar energy is now cheaper than nuclear and coal, and slightly lower than that of natural gas. Almost 90% of the increase in total power capacity worldwide could last year be attributed to the growth of wind, solar, and hydro power.
Governments are simultaneously announcing massive green infrastructure packages. The European Union’s (EU) Green Deal aims to meet the targets of the Paris Agreement and making the trade bloc carbon neutral by 2050. The 1 trillion package includes funding aimed at projects mitigating climate change. Key legislation and policies, including an EU Emissions Trading System and national emissions targets for the transport, buildings and agriculture sectors have also been put in place. Meanwhile, the US has returned to the global climate arena following Joe Biden’s arrival in the White House. The Democrats have introduced a wide-ranging climate bill, aiming at a fully decarbonized US economy by 2050 and will trigger multi-billion dollar investments into climate friendly infrastructure.
Thematic investment strategies identify the companies best placed to benefit from the above-mentioned powerful trends (amongst many others) and participate in their dynamic growth stories to deliver attractive returns. Investors can select from a wide range of themes, ranging from future mobility concepts or e-sports to gender diversity.
By contrast, impact investing aims to achieve a positive effect in mitigating environmental and social issues, alongside achieving financial returns. At Vontobel, our impact strategies invest in businesses deemed best suited to drive progressive change or support such transition processes.
The coming decades will, in our view, be a super cycle for investments in clean energy supply, low-emission transportation, resource-efficient industrial production, and building construction, as well as clean water and lifecycle management.
The globalization of climate policies across the globe and the aim of the world’s super-powers to reach zero emissions between 2050-2060 will boost such investments opportunities. So will additional government packages in favor of greening their economies. Over the next decades, we expect many interesting opportunities for long-term investors in these areas.