This thematic content relates to investment strategies managed from the United Kingdom by Newton Investment Management Limited. This content does not apply to investment strategies managed from the United States by Newton Investment Management North America LLC.
With extreme weather events reported regularly in the media, and 2020 recorded as the joint hottest year on record addressing climate change and other environmental issues has never seemed more urgent. Increasing levels of economic activity, supported by centuries of burning fossil fuels, has created significant stress across the world’s environmental resources, necessitating profound changes to modern society if we are to restrict warming to 2 degrees Celsius (3.6 degrees Fahrenheit), as agreed in the 2015 Paris Agreement.
Sustainable innovations will change the face of industries across the planet, which creates the potential for both winners and losers, making this a key area of interest for active investors.
Who Might Triumph?
There are companies trying to solve these problems – and we want to find them. On a greener, cleaner planet, we believe that winners could include companies able to innovate and provide new products and services that mitigate environmental pressures. Losers could be established companies which do not adapt their business models or face rising financial/reputational risks owing to non-compliance with environmental policy.
By analyzing our investments through an environmental lens, we believe we put ourselves in the best position to identify long-term opportunities in a world going green.
Our Key Areas of Focus
As the world’s energy consumers – from individual households to large-scale industry – increasingly move away from more outdated fossil fuels, we believe opportunities will exist for those providers offering competitive, scalable and environmentally sustainable energy sources.
From the humble LED to the burgeoning Chinese smart power grid, at every point on the spectrum, policymakers and companies are seeking means to derive and use the most efficient and environmentally friendly methods to power the world.
The automotive industry has been undergoing considerable change, with little sign of deceleration. Increasing knowledge of the impact of the traditional internal combustion engine on the environment has led to a noticeable shift in consumer auto preferences and government policy, with electric-vehicle penetration set to rise in the coming years. The growing adoption of electric vehicles has far-reaching implications for a number of sectors beyond the automotive sector, including chemicals, mining, metals and technology.
Resource Management and Recycling:
Growing end-user and policymaker awareness of harmful waste products and poor recycling practices has given rise to a new regulatory environment, in which depositors of harmful waste (particularly plastics) are facing increasing pressure to reform current, unsustainable standards. We believe the beneficiaries in this evolving marketplace will most likely be those capable of remedying outdated, harmful, and unpopular means of production and distribution.
Of Course, Our Themes Don’t Exist in a Vacuum
With the world’s population continuing to expand, our population dynamics theme considers the implications of our increasingly crowded planet.
The shifting consumer habits of the world’s population are likely to have profound consequences for the climate. Our consumer power theme explains these trends.