Spurred by the far-reaching influence of the broad climate megatrend, the environmental theme now represents some of the world’s fastest-growing sectors, characterised by highly favourable economics and structural tailwinds.
The innovative and forward-thinking nature of companies at the forefront of providing environmental solutions gives investors exposure to a diversified range of businesses that can deliver a persistent return premium over the long term.
To provide even greater scope to capitalise on this trend, the opportunity exists across both public and private companies in various sectors and geographies – assuming there is a reliable and repeatable investment process.
These were some of the key takeaways based on insights from investment and market specialists at Pictet Asset Management, speaking in Hong Kong and Singapore with senior executives at family offices and endowments at discussions hosted by AsianInvestor about how to capture opportunities in public and private markets from emerging environmental themes.
Investing beyond the energy transition
Among the biggest misconceptions about environmental investing is the view of it being a niche area focused mostly on energy transition.
Instead, the opportunity set is broad and diverse. In addition to renewables, its coverage includes energy efficiency, sustainable agriculture and forestry, water supply and technologies, waste management and recycling, and pollution control.
From a listed equity perspective, the environmental solutions space focuses on different business models, industries, sectors and products, said Jennifer Boscardin-Ching, client portfolio manager at Pictet Asset Management.
“These are also not always correlated to each other,” she added, highlighting the diversity available when comparing forestry, agriculture and renewable energy investments, or technologies, software, utilities and waste management.
Put simply, the thematic of an environmental lens enables investors to identify the most compelling opportunities in fast-growing segments. These include:
Greenhouse gas reduction – energy storage, energy efficiency, low/no/removal carbon technologies, and renewable energy technologies and services.
Sustainable consumers – agri-tech, food safety, supply chain optimisation, and food-tech.
Pollution control – water quality, air quality, soil preservation, and waste treatment.
Circular economy – the sharing economy, recycling, resource efficiency, and bio-based materials.
Enabling technology – sensors and data capture, the semiconductor value chain, design and engineering software, and green chemistry.
“Fundamentally, we have a very high conviction that we need to preserve the environment,” explained Goh Hui Yang, head of alternative investments for Pictet Asset Management in Asia.
The environment as a tech enabler
In terms of compelling areas for investors to focus on, Boscardin-Ching pointed to spending on urban resil