Ten themes for sustainable investing

16/02/2018

Download

Hamish Chamberlayne, Portfolio Manager with Janus Henderson’s Global Sustainable and Responsible Investment (SRI) Team, details the ten sustainability themes – five environmental and five social – that guide the generation of the team's investment ideas.
 
The development of the world economy has reached a critical juncture. Over the last century it has depended on the availability of cheap resources to drive economic growth. However, the supply and use of many natural resources are approaching their limits. Climate change is the most subtle, yet arguably the most important, constraining factor. We believe the defining investment issue of our time will be transitioning to a low carbon and sustainable economy while maintaining the levels of productivity required to deliver the goods and services that growing and ageing populations require.
 
We invest in companies that are rising to the challenges posed by global megatrends and those seeking to transform the industries in which they operate. In building our portfolios we are also aiming to balance environmental and social sustainability. The ten themes that guide the generation of our investment ideas are split into five environmental and five social themes, and the concept of ‘sustainability’ runs throughout our investment process. We believe that well-managed companies that have a competitive advantage will generate sustainable cash flows and returns on invested capital.
 
A pdf version is available here:
 

Five environmental themes

Sustainable Transport

Currently transport contributes to 23% of global greenhouse gas emissions from fuel combustion (source: World Bank), making it a significant target for government curbs. This risk presents an opportunity for companies at the forefront of pioneering new energy technologies, vehicle efficiency, and public transport infrastructure. For example, advances in lithium-ion (Li-ion) battery technology mean that fully electric vehicles are becoming a more viable option for the average consumer in terms of cost, range (distance per charge), and driving experience (eg, low noise, zero emissions, greater internal space), such that they could challenge the dominance of combustion engines and traditional auto manufacturers within the next 10 years. Public transport, including rail and bus networks, is an important area of investment for reducing emissions, noise pollution, and congestion through shared journeys. Additionally, cycling is increasingly being promoted by governments for health and environmental reasons, which is supportive of companies with goods and services linked to it.

 

Water Management

The World Health Organization estimates that 1 in 10 people globally lack access to safe water, while 1 in 3 lack access to proper sanitation. It is expected that half of the world’s population will be living under the threat of water scarcity by 2030. Water is under growing pressure both on the supply side (insufficient fresh water, uneven distribution, poor quality, climate change) and the demand side (increasing use in agriculture, industry, and municipal/residential areas). Governments cannot act alone to solve shortages – significant investment is required in infrastructure, alongside behavioural changes among all consumers to bridge the supply gap.

 

Cleaner Energy

If the world economy is to limit the increase in global average temperatures to 2 degrees over pre-industrial levels, then investment in renewable energies is going to be crucial. The price of wind and solar power continues to decline, and is now on a par with, or cheaper than, grid electricity in many countries. Solar makes up less than 1% of the electricity market, but could become the world’s biggest single source of renewable energy by 2050, according to the International Energy Agency. One exciting development for the market is the falling costs of viable energy storage solutions: storage can help smooth the peaks and troughs associated with variable output from solar and wind farms.

 

Efficiency

Roughly two thirds of primary energy contained in fossil fuels globally is wasted. Efficiency improvements are vital if we are to achieve economic growth while keeping carbon emissions within recommended levels. Changes will not just be needed within the industrial and transportation sectors: residential and commercial buildings are the largest and most inefficient users of energy globally. Incandescent light bulbs are an extreme example of energy loss; in contrast LED bulbs can be 90% more efficient and last 10 times longer.

 

Environmental Services

As the global population continues to grow and urbanise, cities are facing a sharp rise in the volume and costs of their waste. The World Bank estimates that if no steps are taken, the amount of global solid waste produced is on course to exceed 11 million tonnes per day by 2100, three times as much as produced currently. Rather than being recycled, the vast majority of waste that is collected goes straight to landfills or is incinerated, releasing lethal toxins, greenhouse gases and leachate (liquids). Companies involved in waste management, recycling, and environmentally-focused engineering and infrastructure consultancy companies will be at the forefront of enabling this to change.

 


Five social themes

Sustainable Property & Finance

Financial institutions can be a force for good, lending to the real economy and allocating capital to where it is most productive. Consumer (retail) banks provide essential products and services for savers and borrowers, including current accounts and residential mortgages, and allow smaller and medium-sized businesses to manage cash flows, secure commercial property, and grow their enterprises. Also falling within this theme are social sector organisations that deliver affordable housing and supported living, and life insurance companies, which provide financial security and peace of mind for individuals and their loved ones.

 

Safety

There are several key aspects to this theme including workplace safety, road safety, consumer safety, and safety from cyber-attacks and financial crime. According to the World Health Organization injuries continue to kill more than 5 million people each year. Of this, about 2.3 million people die as the result of workplace accidents or occupational illnesses, and road traffic injuries claim around 1.25 million lives. Outside of these figures, many more people are seriously injured or left with permanent disabilities. In the area of consumer goods, complex global supply chains mean extra vigilance is required for assuring the safety of food and household goods/products. Lastly, cyber-attacks are growing in sophistication and frequency, resulting in an increased demand for cybersecurity.

 

Quality of Life

Gross domestic product (GDP) data continues to be used as the best measure for economic well-being, but an increasing number of national and local governments are using happiness data and research in their search for policies that could enable people to live more enriched lives; the less tangible aspects to our societies are arguably as important to health and wellbeing as material wealth. Companies that are well-governed, act as responsible employers, promote societal well-being, and consider their impact across all areas of their respective supply chains, are vitally important for creating a sustainable global economy.

 

Knowledge & Technology

Global productivity growth has been slowing. Productivity growth is essential if we are to achieve sustainable economic growth and therefore provide an adequate economic environment for a growing and ageing global population. Productivity improvements can come from many different sources: among these are mobile communication and networks, connectivity, intelligent use of data, improved access to knowledge and education materials, robotics, additive manufacturing or 3D printing, and advanced material science. Technical innovation is also catalysing ‘the sharing economy’, a socio-economic ecosystem built around the efficient sharing of human and physical resources.

 

Health

Ageing populations are beginning to put systemic pressures on health provision and social care services in many developed economies, and this is likely to be a trend for developing economies too. According to the Organisation for Economic Co-operation and Development (OECD) more than 25% of the global population is projected to be over 65 years old by 2050 compared with just 15% today. A US study also indicates that around 50% of lifetime health expenditure is incurred during the senior years, so the challenge will be providing affordable care and services for this growing segment of society over a longer time horizon – as life expectancies are also rising.

  

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.

For promotional purposes.


Important information

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

Janus Henderson Global Sustainable Equity Fund

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Henderson Global Investors (Singapore) Limited, 138 Market Street, #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

Information on this document is on Henderson's best endeavours.

Specific risks

  • Investment management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • 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.
  • 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.
  • Derivatives use exposes the Fund to risks different from, and potentially greater than, the risks associated with investing directly in securities and may therefore result in additional loss, which could be significantly greater than the cost of the derivative.
  • Changes in currency exchange rates may cause the value of your investment and any income from it to rise or fall.
  • 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.
  • Any security could become hard to value or to sell at a desired time and price, increasing the risk of investment losses.

Risk rating

Janus Henderson Institutional Global Responsible Managed Fund

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Henderson Global Investors (Singapore) Limited, 138 Market Street, #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

Information on this document is on Henderson's best endeavours.

Specific risks

  • Investment management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • 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.
  • 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 value of a bond or money market instrument may fall if the financial health of the issuer weakens, or the market believes it may weaken. This risk is greater the lower the credit quality of the bond.
  • Derivatives use exposes the Fund to risks different from, and potentially greater than, the risks associated with investing directly in securities and may therefore result in additional loss, which could be significantly greater than the cost of the derivative.
  • Changes in currency exchange rates may cause the value of your investment and any income from it to rise or fall.
  • When interest rates rise (or fall), the prices of different securities will be affected differently. In particular, bond values generally fall when interest rates rise. This risk is generally greater the longer the maturity of a bond investment.
  • Any security could become hard to value or to sell at a desired time and price, increasing the risk of investment losses.

Risk rating

Share

Discuss

 
 
[##ImageTip_CAPTCHA]
 
Future Trends

Future Trends

The Future Trends content series explores the drivers that will reshape the investment landscape in the years to come. It seeks to provide insight and education on subjects that will impact investors’ decision-making and their allocations.



Related funds

Classifications

Important message

Fund name changes

Please note that from the 15 December 2017 funds previously named Janus or Henderson have been renamed Janus Henderson. This change aligns our product names with our name, Janus Henderson Investors, following the merger of Janus Capital and Henderson Global Investors in May 2017.

This name change does not impact on the management of the underlying funds and investors and advisers are not required to take any action. This does not affect Janus Henderson’s range of investment trusts.