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Three sustainable investment themes inspiring us

19 June 2020

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Phoebe Stone, Partner and Head of Sustainable Investing

Across the world, lockdown measures are being eased as the coronavirus looks to be abating, meanwhile investment markets are pricing in economic recovery. Phoebe Stone, Head of Sustainable Investing, writes about three investment trends currently playing out in our Sustainable Portfolios.

1. The Green Recovery

As economies tentatively reopen, one strategy being utilised by governments to kick-start growth is green investment. The European Central Bank (ECB) has allocated 25% of the EUR750bn recovery package to sustainable spending. Boris Johnson last week detailed plans of the UK's green recovery strategy, including the decarbonisation of the UK's most emitting sectors, increasing the manufacture of low-carbon goods and the creation of green enterprise zones. This builds on the commitment made by the UK Government in the Spring Budget 2020 for considerable spending on sustainable economic growth and development. Whilst the UK and Europe are ahead of other parts of the world, the importance that is being placed on these sectors looks to be the direction of travel for many countries worldwide. Billions of pounds are being committed and spent in these green recovery plans, but which are the industries positioned to benefit? To name a few; green technology, green batteries, green and low-carbon vehicles, companies providing infrastructure for plastics recycling, energy efficient building materials, green infrastructure, renewable energy production and ancillary renewable energy industries.

 2. The 'S' of ESG: The human factor

During 2019, the 'E' of ESG (Environment, Social and Governance), was very much in the spotlight. Climate change and resource depletion were catapulted from discussions between scientists and activists to front page news. As 2020 has unfolded, increasing attention is being paid to the 'S', or the social factor. This assesses the impact a company has on not only local communities, but also the business' workforce. Extensive ESG analysis is carried out within all of the funds held in the Sustainable Portfolios, with social factors playing an extremely important part. Increasingly, social metrics are being considered as relevant by traditional investment professionals. An understanding of supply chain management, culture within a business, crisis management and, something so relevant in the current climate, diversity of workforce, are examples of information sets that more and more investors are now keen to capture and integrate.

 3. Investing in our health

What became clear very quickly during the coronavirus crisis, is the woefully inadequate investment in pandemic preparation, and also in healthcare as a whole. Sustainable portfolios and funds often have an overweight to the healthcare industry, because of the clear positive impact such investment delivers. Many of the funds in the Sustainable Portfolios invest in large pharmaceuticals businesses that are, right now, developing vaccines for the virus. However, there are also many more nuanced investments within the healthcare sector that we believe will attract more focus in our post-COVID world.

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