Sustainable developments will be an essential part of future-proofing portfolios, as action on net zero intensifies, according to Stewart Investors.
Pablo Berrutti, an investment specialist for Stewart Investors Sustainable Funds Group, said taking a long-term view was the key to all kind of future proofing.
“We try to take a 10-year view on valuation, we want to hold companies for a decade-plus and we don’t really think about the benchmark as being the arbiter of risk where we’re much more concerned about losing clients’ money,” Berrutti said.
“When we think about future proofing, sustainable developments are really helpful. Part of that conversation – there’s a lot of other aspects – but from a sustainable development perspective we talk about our sustainability positioning and we talk about a company’s headwinds and tailwinds.
“The most obvious one people would be familiar with is the fossil fuel industry which has some headwinds as the economy transitions to no carbon/low carbon energy.
“If you’re taking a 10-year view, for us, we struggled to get comfortable with that and see that as a way of future proofing is by not investing in those businesses because of the transition.”
On the flip side, Berrutti said there was opportunities for companies that would support the transition to a low carbon economy.
“They’re a nice tailwind for growth into the future because the changes that are going to happen that have already been quite disruptive are going to become more disruptive as they become more urgent,” Berrutti said.
“Companies that have a strong balance sheet that have simple accounts, that pay a reasonable rate of tax, that pay their suppliers in a timely fashion, that can demonstrate sustainable earnings through the cycle – those types of financial qualities are the type that will help avoid capital loss when times turn ugly or interest rates start going up.”