16 Feb 2021
Sacha El Khoury, Director, Portfolio Manager, Global Equities
Global action to combat Covid-19 last year was unprecedented. The new virus variant is of course a huge cause for concern as case numbers continue to rise, but ultimately we hope the vaccine rollout will lead an eventual return to some sort of normality. We must now also deal with existential crises that are unfolding over much longer time frames yet require a similar urgent and unified approach – such as climate change, resource constraints and ageing and growing populations. Regulators, governments and corporates are finally mobilising – and we see this momentum building in 2021 and beyond. So what will the ESG landscape look like this year – and where could the opportunities lie?
Regulation in Europe has only intensified since European Commission President Ursula von der Leyen proclaimed that the EU Green Deal would be Europe’s “man on the moon moment”. The deal aims to reach carbon neutrality by 2050, making Europe the first climate-neutral continent. The pandemic did not weaken the support for the Green Deal but reinforced it, leading to a recovery plan with a strong focus on green investments and digitalisation. We believe this regulatory tailwind will intensify this year and beyond. For example, the Paris Agreement requires all buildings to be net zero carbon by 2050, but less than 1% are today. Companies like Schneider, the global leader in buildings’ energy transition and automation, offer solutions to this challenge and will ultimately benefit from the intensifying regulatory backdrop.
Corporates are making bold commitments towards a brighter future for our planet. Swiss giant Nestlé recently announced ambitious targets to reduce its greenhouse gas emissions that will ripple through its supply chain and various sectors, creating opportunities for companies tackling the complex challenges facing our global Agri-Food system.
One such company is IFF, a US-based flavours and fragrances company, which provides solutions to some of the complex challenges faced by the food and personal care manufacturers. Consumers want products that are high quality without harming the planet, and IFF enables this by providing the insight, world-class innovation and application expertise. The company is strongly positioned to benefit from the sustainable nutrition tailwind.
Similarly, the transition from traditional to electric vehicles (EVs) reached a tipping point in 2019. Covid-19 has seemingly accelerated this process, and in November 2020, EVs hit an incredible 17% of new car sales in Europe’s four largest car markets – a figure that would have been unthinkable as little as a year ago. And the runway for further growth is clear, driven by regulation: to reach the Paris Agreement goals, EVs must be 50% of the European market by 2030. Belgium-based materials technology company Umicore plays an important part in the transition to decarbonised mobility. As a leading supplier of cathode materials for EV batteries, Umicore is a key enabler of the growth.
We expect momentum in tackling urgent environmental and social issues to continue unabated in 2021, catalysed by regulation and corporate actions. We are focused on identifying and investing in quality companies that can harness the huge opportunities being created, as we believe they provide outstanding long-term investment opportunities.
Disclaimers:
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