SRI Outlook: innovation and opportunity go hand in hand

27/11/2018

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Hamish Chamberlayne, Head of Socially Responsible Investment, expects continued uptake of sustainability issues by companies, investors and active managers.


What are the key themes likely to shape markets in 2019?

The long-term trends we analyse have not changed, although recent market volatility has potentially created buying opportunities. Sustainability issues continue to grow in importance, with active managers making a positive impact by consciously allocating capital towards companies that are contributing to a more sustainable planet, and away from those doing harm. The ‘Great Acceleration’ of the past few decades has led to a phenomenal increase in the demand for energy, land and water. Now the concurrent climate change and environmental destruction is too obvious to ignore. To quote the chief executive of the World Wildlife Fund, “we are the first generation to know we are destroying our planet and the last one that can do anything about it”.

Plenty of companies recognise that a sustainable approach to delivering goods and services, and providing solutions to social and environmental problems, can be profitable. All this feeds into our consideration of the quality of a business and its sustainability on a forward-looking basis.


Where do you see the most important opportunities and risks within your asset class?

When we think about sustainability we see a world of opportunity. We are seeing rapid increases in renewable energy, many more electric cars, and billions more connected devices with semi-conductors and microchips capturing and generating vast amounts of data. All of this will be stored in the cloud, requiring memory and then analysed and made useful by software in order to create efficiencies, increase productivity and generate value. As well looking at many leading companies related to these areas, we also examine consumer companies leading the way in the circular economy; and to companies in health and life insurance, healthcare services, water technology, electrical safety, architectural design, education and entertainment. We also believe that oil prices will start to decline again – in fact a high oil price is self-defeating since it only serves to accelerate innovation and substitution.


How have your experiences in 2018 shifted your approach or outlook for 2019?

Our strategy focuses on ten investment themes that lead the team to explore companies that provide solutions to long-term environmental and social megatrends. With sustainability closely linked to innovation, we can take advantage of new solutions while helping to avoid the disruptive outcomes they often accompany.

As active investors focused on delivering long-term returns, we have to be good stewards of our clients’ capital, directing capital towards productive and responsible investments. Ultimately, these factors feed into the consideration of the quality of a business, and its sustainability on a forward looking basis. Mean reversionary events are inevitable over shorter time periods and, when they happen, it is important to remind ourselves of the difference between value and valuation. Many factors can cause fluctuations in near-term valuations, including interest rates. Over the long term however, we believe that growth poses the greatest potential for generating value for investors. To our mind, creating long-term investment returns is, by its very nature, investing in sustainability.



Which themes have the potential to redirect markets in 2019? Download our Infographic to find out




These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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Please read the following important information regarding funds related to this article.

Janus Henderson Global Sustainable Equity Fund

Specific risks

  • This fund is designed to be used only as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this fund.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • If the Fund holds assets in currencies other than the base currency of the Fund or you invest in a share class of a different currency to the Fund (unless 'hedged'), the value of your investment may be impacted by changes in exchange rates.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
  • The Fund follows a sustainable investment approach, which may cause it to be overweight and/or underweight in certain sectors and thus perform differently than funds that have a similar objective but which do not integrate sustainable investment criteria when selecting securities.

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