From New Delhi to Bengaluru, India is home to some of the most polluted urban centres in the world. But this year, its skies turned clear and blue for the first time in decades after the coronavirus lockdown shut factories, grounded flights and removed cars and trucks from the roads. As residents across the country breathed clean air and spotted stars at night, those in the northern state of Punjab could see the Himalayan mountain range more than 100 miles away.
The sudden halt in economic activity has drastically cut pollutant emissions and shrunk humanity’s ecological footprint. But it requires a fundamental shift in our economic structures to build a more sustainable post-pandemic world.
From air pollution to climate change, tackling environmental problems will take a monumental effort. Investors, as stewards of global capital, have a crucial role to play in placing the world on a more sustainable footing.
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New environmental equities
For investors, the opportunity to bring about change has never been greater. With governments and businesses responding to pressure to contain ecological degradation, a distinct and attractive group of environmental-equity investments has emerged.
These are companies that combine strong environmental credentials with innovative products and services designed to safeguard the world’s natural resources. The environmental-product industry is one of the world’s most dynamic: already a $2.5trn market, it is expected to grow by an annual 6%-7% over the next few years. The Global Environmental Opportunities Fund focuses exclusively on this sector. Central to our strategy is a ground-breaking scientific framework called Planetary Boundaries. This is a model, developed in 2009 by scientists at the Stockholm Resilience Centre, identifying nine factors – including carbon emissions (climate change), biodiversity, fresh water and land use – crucial to maintaining the stable biosphere required for human development and prosperity.
The most promising subsectors
We use this framework to identify firms with the strongest environmental credentials across their entire value chain – from the extraction of raw materials to manufacturing processes, distribution and transport, product use, and disposal and recycling.
One particularly promising subsector is environmental testing. Companies that provide tools for air, water, soil and food quality measurement comprise a $5bn market growing strongly in emerging economies. Strong performers in this area include Thermo Fisher Scientific (NYSE: TMO), a leading manufacturer of laboratory equipment and scientific instruments for the healthcare and environmental markets.
Using resources responsibly
Resource efficiency is another key theme: companies operating in simulation and advanced industrial design and engineering solutions, such as Ansys (Nasdaq: ANSS) and Autodesk (Nasdaq: ADSK), help the planet use its limited resources responsibly. Ansys is a leader in industrial-simulation and design software. Autodesk specialises in computer-aided design software, with a particular emphasis on applications for architecture and engineering.
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