Should fundies be looking more seriously at sustainability?
Fund managers and their clients are overlooking sustainable investments at their own expense, according to Nanuk Investment Management.
The firm’s distribution leader, Dan Powell, labelled such investments as “transformative, pervasive and investable” to a roomful of investors and potential investors this week, saying that the world was currently undergoing a “sustainability revolution”.
As the below chart from FE Analytics illustrates, environmentally sustainable assets have outperformed their global equities counterparts over recent years, suggesting there is truth in Powell’s assessment.
FTSE Environmental Opportunities v FTSE All World indices’ performance over last five years
Source: FE Analytics
Nanuk’s chief investment officer, Thomas King, pointed to more obvious sustainability-related trends, such as electric vehicles, autonomous driving and renewable energy, as key areas for investment.
The move toward both autonomous and electric cars, for example, is not going anywhere. All major global car manufacturers have electric cars planned to come onto the market around 2020, while companies such as Uber are pouring money into developing autonomous driving capabilities.
While some of the big names in the field might not suit sustainable investors – Nanuk, for example, avoids Tesla at the moment (it remains in their investible universe) as it has concerns with its governance, valuation and need for money to meet capacity – they can still capitalise on the trend.
Nanuk had invested in TE Connectivity, which belonged in the supply chain for automated car construction, with good results, and also saw benefit from other companies contribution to the process such as Lear Corporation, Valeo, Continental and Asahi Kasei.
King also said that funds need to be looking in less obvious places to fully capitalise from the push toward sustainability.
The industrial Internet of Things, industrial automation, healthcare technology, sustainable materials and advanced materials were all areas where Nanuk believed investors could find value.
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