In Focus: Megatrends  

'The market has turned decisively in favour of ESG'

FTA: When it comes to picking an ESG investment today, what are the key things investors and advisers should look out for?

NS: We think investors should think dynamically and focus on the aspects of the ESG spectrum that matter to them the most.

We believe that narrowly focusing on metrics such as greenhouse gas emissions from each constituent may miss the wider picture. For example, a nickel miner may have a relatively high scope 1 greenhouse gas footprint compared to a software company, but what the nickel miner produces is instrumental to the decarbonisation effort.

Therefore, looking at the emissions of the full life cycle of the applications of nickel is very important.

We acknowledge gathering all the necessary information is difficult, but asking the question ‘does the technology, company, or commodity help or hinder the decarbonisation effort over its life cycle (from production to application to recycling)?’ is a good staring point. 

FTA: Technological development around green products is fast-paced, how do you decide as an investment house which strategies are future-proof and which ones will fail?

NS: We acknowledge that the pace of technological development is fast and subject to abrupt changes.

As an investment house, we generally partner with industry experts to keep our strategies well informed. We maintain close dialogue with our partners.

Moreover, we like our partners to talk to clients through webinars and blogs to ensure knowledge is shared and investors are comfortable that our strategies are at the cutting edge of the most recent developments.

FTA: What has the war in Ukraine taught us about current global energy strategies and how could geopolitical power shifts shape the energy transition?

NS: The war in Ukraine has illustrated that the need for energy independence in Europe [from Russia] is more urgent than ever before. That goes hand-in-hand with the climate-driven energy transition.

We believe policymakers are likely to double down on their efforts to decarbonise because that will fulfil the goal of energy independence at the same time as climate goals. Any softening on climate policy will likely be very temporary in nature to deal with price shocks.

We also find that the materials to enable the transition have become scarcer, with production and exports from Russia being hampered. Therefore, the prices of these materials have also increased and investors in the upstream business have benefited the greatest.

FTA: The events in Ukraine have caused considerable investment volatility. How do exchange-traded fund providers mitigate liquidity risk and screen companies based on geographical conflict risk?