Natural resources are becoming increasingly scarce, and investing properly and sustainably in the green transition requires us to map that value chain to see where the risks and opportunities lie for ESG investors.
How we harness the green transition
As the vulnerability of our natural resources keeps making headlines, the urgency for solutions supporting a more sustainable economy has never been stronger. Yet, current commitments fall short of the compre- hensive actions needed to avert a looming climate crisis and loss of bi- odiversity. Governments, industries, and individuals must collectively rise to the challenge and step up efforts to protect our planet.
These dynamics create attractive opportunities for long-term investors. Companies that offer pioneering solutions for the transition to a greener, and ultimately, low-carbon economy, have stepped into the spotlight as the enablers of the green transition. In particular, the range of opportunities is fast expanding for businesses that offer in- novative solutions to tackle climate change and improve the quality of water, soil, and air.
However, we believe green investing should go further than popular trends and solutions that make headlines. In our view, investors need a deep understanding of the green value chains behind this transition to unlock the full spectrum of opportunities.
In this spotlight, we will delve into how to best harness the green tran- sition through our distinct investment approach. By exploring a selection of strategic environmental themes and navigating through their respective value chains, we will uncover the breakthroughs spear- heading the path towards a successful green transition.
Four mega themes
Within this transformative landscape, we have identified four “mega- themes” that will enable the green transition:
- Ecosystem Protection: companies championing advanced water treatments and pollution-abatement technologies.
- Resource Efficiency: companies pivotal in enabling the circular economy, especially those specializing in waste recycling, hazardous waste treatment, and developing advanced software for material and process optimization.
- Smart Mobility: companies leading the electric vehicles
(EVs) transition and championing sustainable transport innovations.
- Future Energies: companies that enable the transition to
greener energy sources, particularly in renewable energy such as solar and wind, complemented by electrification infrastructure providers, especially regulated power grids.
These four mega-themes are closely interlinked. Protecting Ecosystems en- sures the sustainability of vital resources such as water, but also benefits from Resource Efficiency through waste reduction, improved material use as well as reuse. Smart Mobility, driven by cutting-edge semiconductor technology, accelerates the shift towards transport electrification and the resulting lower emissions. Meanwhile, there is a fundamental shift away from fossil fuels towards Future Energy sources. The combined synergies of these four mega-themes will help us move closer to a green planet.
Why value chains matter in green investing?
As we embark on this green journey, one thing is clear: opportunities abound. For instance, under current government policy, renewables are expected to account for 80% of new electricity generation capacity by 2030, with solar alone accounting for more than half of this expansion. However, taking advantage of the opportunities in green investing as investors in our view means stepping well beyond popular trends and technologies in the news. Only by diving into the depths of the green value chains that support this transition we can unlock the full spectrum of opportunities and navigate the economic cycle.
Our distinct investment approach, focused on “green value chains”, provides the tools to delve deeper into the complex web of technologies and solutions that power the green transition. It goes beyond identifying the endgame to recognise the myriad of enabling technologies and uncover overlooked green solution providers with significant growth potential. More than a superficial scan, it allows us to dive deep into sub-industries and companies to reveal powerful insights and competitive dynamics.
