David Harrison, fund manager, Rathbone Greenbank Global Sustainability Fund, outlines. where he will be looking from a sustainability perspective in 2024
Whilst there are clear signs that inflationary pressures are abating, which has been a positive in the past six months, global growth is likely to remain subdued. This will impact all regions, perhaps somewhat unequally, but it reinforces the need to invest in companies that can generate profitable growth, irrespective of the economic back drop. The direction of global monetary policy is something we continue to watch closely, as this has significant implications on equity markets.
We remain focused on owning quality businesses that have clear sustainability drivers and this remains consistent across regions and sectors. In the current economic environment, we believe this is critical as growth becomes scarcer.
We have been adding exposure to more economically defensive sectors and healthcare is the most notable. The sector not only looks attractive from a valuation point of view, but offers a deep pool of opportunities, exposed to structural growth trends.
We think the opportunity set in the global energy transition continues to grow and we have been adding exposure in the past 12 months. We prefer to own companies that offer comprehensive de-carbonisation solutions and have proven barriers to entry.
Artificial Intelligence (AI) has been on everyone’s radar this year. It’s important to remember that AI is something that has exploded relatively recently, and we will have to monitor how it evolves, but we see definite net positives in terms of sustainability. AI is likely to play a growing role in how we manage natural resources and use human capital more efficiently.
We think it could act as an accelerator in the energy transition, for example, or how we think about developing future healthcare solutions. It certainly has significant potential from a sustainability point of view, but how it is used, deployed and regulated will also be important and something that will unfold in the next few years.
From a pure sustainability point of view, we remain extremely encouraged by the structural trends in areas such as global vehicle electrification and the energy transition. Government policy, through measures such as the Inflation Reduction Act in the US, have acted as a clear tailwind to investment in sustainable infrastructure and we anticipate these benefits will be felt into 2024.
