The World Economic Forum has identified environmental issues as a key risk and we believe that this risk is even more pronounced in emerging markets (EM) and that climate change will have strong economic and political ramifications for EM governments. As environmental risks become increasing sources of both opportunity and risk for investors, we have decided to focus our Infrastructure theme on ‘Green Infrastructure’ which we believe is a multi-decade growth story.
This report summarizes the key factors which we believe will drive the Green Infrastructure theme and analyzes the best ways to benefit from the theme. Rising temperatures and ‘extreme weather’ incidents associated with global warming, the impact of climate change on people’s health, and the increased government focus on environmental issues are all areas which are driving the acceleration of Green Infrastructure. From an investment perspective, the renewable energy (solar and wind power specifically), electric vehicles (from component and battery manufacturers to the actual car makers themselves) and transmission metals industries will provide the best ways to ‘play’ the theme and this report gives more detail on those opportunities. In addition, sectors such as energy storage, food and agriculture and hydrogen are also of interest.
Our investment philosophy and process has always included a detailed assessment of climate-related risks and opportunities as part of our overall ESG assessment. EM are being disproportionately affected by climate change, however, in terms of both physical risks and financial implications, and the substantial deficits in social infrastructure and investment have been exacerbated by the COVID-19 pandemic. As such, we believe Green Infrastructure will provide an exciting opportunity for us.