Investors should not shy away from sustainable investments, as this sector has a long-term investment horizon that has only just begun, according to an expert in the space.
“If you look at alternative energy… it tends to have a higher beta than the market and it has had a rough year,” KBC Asset Management vice president sustainable investment Steven Falci said.
“But if you look at the long-term thesis, renewable energy stocks only make up 4 per cent of the global energy mix.
“The targets are not going to change because of short-term issues, and over the next 20 or 30 years, we are going to go to 20 or 30 per cent renewables in the energy mix, so investments have to be made here,” he said.
Investors should also consider the diversification benefits of the sector.
“Its lack of correlation with global equities is a diversification argument, in a portfolio that does not have exposure to it right now as well,” Falci said.
He said working in the sector’s favour was strong investor sentiment to leave the planet in a better state for the next generation, something that was rarely considered until recently.
“Regardless of their economic status most parents want their kids to do well… not just from the natural perspective in terms of droughts and hurricanes but what that is going to do in a geopolitical context,” Falci said.
