Investing in the regrowth of the future

This article is part of
Guide to Responsible Investing

Among the sustainable investment trends that Newton says will be important in future are nutrition and sustainable food production, an area where they do not believe valuations are high relative to some of the more technology related ESG themes. 

Angus Parker, who runs the HSBC Global Equity Climate Change fund, agrees that changes to the way food is produced will be the next frontier for sustainable investment funds. 

Ian Aylward, head of manager and fund selection at Barclays Wealth, has a fund of impact investment funds. He says one of the things he makes sure to be aware of is that “the funds we invest in, they cannot just be about ‘blue sky thinking’ or a theme, the fiduciary duty is to deliver attractive returns for clients.” 

The fund he invests in to mostly achieve this is run by Impax Asset Management, a business in which he has invested for many years. 

He says: “There are as many types of ESG fund as there are ESG products on the market. We tend to focus on impact investments as those are the ones perhaps that are most focused on the future.”

Natural capital

Kristina Church, head of sustainable solutions at Lombard Odier Investment Management, says: “Environment remains a key area of focus and we expect 2021 to drive further investment opportunities in both climate mitigation and adaptation, but also increasingly in the field of natural capital.

"Nature has largely been ignored as an investable opportunity to date, but with more than 50 per cent of global GDP dependent on nature, and more regulatory focus on the need to protect this most productive asset and place a value on its regenerative capabilities, we expect funds focusing on opportunities in the natural capital space will see significant upside."

She adds: "Technology can help provide more inclusivity through, for example, access to healthcare, banking and clean energy. Digitisation is also enabling the virtualisation of print media, e-commerce and paper-based record keeping, reducing material footprints. Cloud computer, sharing and leasing models are gaining ground and smart, AI-enabled, production techniques and the use of advanced materials are all likely growth opportunities.

"For instance, our climate transition strategy includes many companies in heavy-carbon industries but which are enabling a net-zero transition by investing in new technologies and solutions to reduce their carbon exposures."

Paul Niven, head of multi-asset portfolio management at BMO Global Asset Management, says: "With cost considerations to the fore, the push to passive has been significant. Passive strategies have also enjoyed the tailwinds of favourable market conditions – an environment that has led to many questioning whether the additional cost of active management is worth paying.

"We think, at the right price point, it is, for three key reasons. First is the scope to outperform – something a passive strategy inherently can’t do. Second, is the ability to protect capital in more challenging markets.