Investors should build their portfolios around the socio-economic “change and transition” that is sweeping the world, says Natixis Investment Managers subsidiary Mirova.
There are “four major transitions” underway that will have significant consequences for the world’s economies and societies, according to a note by Mirova chief investment officer for sustainable equities and fixed income Jens Peers and head of socially responsible investing research Hervé Guez.
“The first transition is driven by demographics, with an ageing population, the rising importance of Millennials and women in our economies, urbanisation and a rising middle class in emerging countries as the main drivers,” Mirova said.
“A second transition is environmental with the urgent need for solutions to climate change and natural resource depletion.
“A third transition is technological in nature, with tech playing a more important role in all aspects of our lives.
“And finally, we are also going through a major transition in terms of governance, both for states and for businesses, who have to deal with a crisis of globalisation and act together in the general interest and for the common good.”
Dealing with these transitions “at a sustainable pace” would be “the key to success”, according to the note.
“The solution is not polarisation, but co-operation,” it said.
Successfully managing these transitions would mean investment in education, an emphasis on gender equality, and paying and collecting fair taxes, the note said.
But the transitions would carry “both positive and negative implications”.
“Investing in broad markets also means owning stocks and bonds negatively exposed to the aforementioned transitions,” Mirova said.
“Investors will need to keep in mind these transitions when building their portfolios.”
The authors also tipped the energy, resources (water), technology and healthcare sectors to hold “good investment opportunities” in 2018.