Could ESG opportunities offer protection amid economic uncertainty?

“Instead, we believe investors should focus on durable themes centred around the world’s biggest long-term challenges, which can have remarkable staying power in the midst of geopolitical and economic volatility.

“Our sustainable themes are powered not by the fleeting confidence of consumers but by massive secular tailwinds, including global pledges for net zero emissions, the generational push for essential healthcare services and the needs of a growing global population for food, shelter, financial security and infrastructure. 

“These trends are very much intact despite the increasing noise of the global financial markets. Often, periods of crisis actually serve to accelerate sustainable changes that are already underway.”

What ESG opportunities are there in the US?

“The opportunity for ESG investing in the US market is really exciting,” says Fidelity International portfolio manager Alex Gold. “In our view there is a huge and largely untapped opportunity to invest in companies whose products and services are actually contributing positively from an ESG standpoint. We call these companies ‘sustainable enablers’.

“Many of these companies will also have good ESG policies, but crucially we think they are making an important contribution to sustainability due to the actual products and services they sell. In the US there are many great enablers across many industries.”

David Harrison, Rathbone Greenbank Global Sustainability Fund manager, highlights businesses that are helping to improve US water infrastructure. According to the US Environmental Protection Agency, national studies indicate that on average 14 per cent of water treated by water systems is lost to leaks.

“There is a clear recognition of the need for sustained long-term investment in newer technologies and great efficiency. Water investment is arguably less cyclical too, so this segment of the market could be more resilient in a weakening growth environment.

“There is also increasing focus on improving water safety, with the potential for stricter regulation on contaminated water. Many of the companies in this space enjoy strong market share, and barriers to entry are quite high. Valuations have become more attractive since the start of the year, which presents an interesting long-term opportunity.”

While the tech sector itself is typically not offering many sustainability solutions, the tech mindset has led to many innovative companies in the healthcare sectorJens Peers, Mirova US

In addition to US companies that are active in water treatment or infrastructure, Mirova US CEO and CIO Jens Peers highlights the residential solar market in the US as a large and “well-organised” opportunity that is more fragmented elsewhere in the world.