“These trends are very much intact despite the increasing noise of the global financial markets. Often, periods of crisis actually serve to accelerate sustainable changes that are already underway.”
What ESG opportunities are there in the US?
“The opportunity for ESG investing in the US market is really exciting,” says Fidelity International portfolio manager Alex Gold. “In our view there is a huge and largely untapped opportunity to invest in companies whose products and services are actually contributing positively from an ESG standpoint. We call these companies ‘sustainable enablers’.
“Many of these companies will also have good ESG policies, but crucially we think they are making an important contribution to sustainability due to the actual products and services they sell. In the US there are many great enablers across many industries.”
David Harrison, Rathbone Greenbank Global Sustainability Fund manager, highlights businesses that are helping to improve US water infrastructure. According to the US Environmental Protection Agency, national studies indicate that on average 14 per cent of water treated by water systems is lost to leaks.
“There is a clear recognition of the need for sustained long-term investment in newer technologies and great efficiency. Water investment is arguably less cyclical too, so this segment of the market could be more resilient in a weakening growth environment.
“There is also increasing focus on improving water safety, with the potential for stricter regulation on contaminated water. Many of the companies in this space enjoy strong market share, and barriers to entry are quite high. Valuations have become more attractive since the start of the year, which presents an interesting long-term opportunity.”
In addition to US companies that are active in water treatment or infrastructure, Mirova US CEO and CIO Jens Peers highlights the residential solar market in the US as a large and “well-organised” opportunity that is more fragmented elsewhere in the world.
“The US is also very tech driven,” adds Peers. “While the tech sector itself is typically not offering many sustainability solutions, the tech mindset has led to many innovative companies in the healthcare sector, including the biotech and general pharmaceutical sector, but also medical devices such as DNA sequencing devices or surgical robots.”
RLAM head of sustainable investments Mike Fox likewise describes the US economy and market as the most innovative globally. “ESG and sustainability has a natural affiliation to areas such as healthcare, engineering, chemistry and technology, as they are often industries which provide solutions to environmental and social problems.
“ESG generally has been less adopted by US investors and corporates relative to the UK and Europe. This is an opportunity as it hasn’t been priced into investments in the same way it has in other regions.”
