In this video presentation, Hamish Chamberlayne, Portfolio Manager within Janus Henderson's Global Sustainable and Responsible Investment Team, discusses the myths and realities of sustainable investment. He explains why he thinks environmental and social megatrends will accelerate the transition to a low carbon economy and explores some of the investment areas that stand to be disrupted.
- Population growth, ageing populations, resource constraints, and climate change are the key megatrends pressuring the sustainability of the global economy.
- Market forces are likely to drive the transition to low carbon, as the price of renewable energy, such as wind and solar, continues to fall.
- Significant disruption looks set to happen across many sectors: electric vehicles are already disrupting transport markets and the battery mega-factories are coming.
- The future sustainability of the global economy requires change across multiple areas.
Decarbonise the economy = lower the use of fossil fuels (ie, coal, oil & gas) industrially, commercially, and domestically. Because they contain carbon, burning these types of fuel results in the formation of carbon dioxide, the main greenhouse gas recognised by scientists as being responsible for rising average global temperatures (climate change).
Divestment = the process of selling an asset for financial, social, or political goals.
Initial public offering (IPO) = an act of offering the stock of a company on a public stock exchange for the first time.
Lithium ion batteries = a type of rechargeable battery; these currently dominate the electric vehicle market.
Marginal demand = the change in demand for a product or service in response to a specific change in its price.
Market forces = the economic factors affecting the price of, demand for, and availability of goods and services.
Renewables = energy produced from renewable sources, such as wind, solar, hydro, and geothermal. These are also known as ‘clean’ energy technologies.
Short/short position = this involves borrowing then selling what the investor believes to be overvalued assets, with the intention of buying them back for less when the price falls. The position profits if the security falls in value. A ‘big short’ is a strategy that targets an entire group of related assets for short selling, with the potential for great gains (or losses if the trade goes wrong). For example, the ‘big short’ during the Global Financial Crisis was shorting securities related to the housing market (such as those backed by mortgages and/or home loans), banks and other financial service providers.
Structural deflation = deflation is a decrease in the general price level of goods and services. Structural deflation is a long-term downward trend in these prices.
Sustainable economy = economic development that attempts to satisfy the needs of humans but in a manner that helps sustain natural resources and the environment for future generations.
Sustainable investing = an investment approach that focuses on selecting companies that are developing innovative solutions to the long-term issues facing the global economy, and that exhibit strong environmental, social, and governance characteristics, thereby supporting the transition to a more sustainable global economy.
Unsubsidised = not supported by financial subsidies (eg, those available through government tax relief schemes).
Zero carbon factory = a factory in which energy consumption is net zero, often achieved via the use of renewable energy. For example, Tesla’s factory is covered in solar panels and will put back into the energy grid as much electricity as it uses for production purposes.