Stockholm (NordSIP) – Investors looking to address sustainability challenges beyond greenhouse gas (GHG) emissions reductions now have a broader range of choice thanks to the launch on 31 October, 2023 of two new thematic funds by Schroder Investment Management. The new active global equity strategies will be part of the asset manager’s Global Transformation Range and will seek to contribute to key areas of the transition to a more sustainable global economy while providing investors with growth opportunities from innovative companies. Both products are recognised under Article 9 of the European Union’s Sustainable Finance Disclosure Regulation (SFDR).
Moving away from the take-make-waste business model
The Schroder ISF Circular Economy fund will focus on companies working on the move away from unsustainable linear value chains. The overarching problem was recently highlighted by the Stockholm Resilience Centre’s September 2023 revelation that six of the nine boundaries essential to the stability and resilience of the Earth system had been breached. Jack Dempsey, portfolio manager for the new SISF Circular Economy strategy believes that urgent action is required: “The global economy currently consumes close to two planet Earths’ worth of resources a year. The imbalance between demand for resources and their supply is unsustainable and change is urgently needed. Shifting to a circular economy is essential to tackle this key challenge.”
With greater regulatory interest and consumer awareness of problematic companies and sectors, opportunities are opening up for innovation towards greater circularity and other less resource intensive business models. Dempsey explains: “The prize for companies that can close the resource gap is massive, estimated at c. $25 trillion by 2050. Entire industries have the potential to be transformed. For example, clothing resales are expected to be bigger than fast fashion by 2029 and, as plastics come under increased scrutiny from consumers and regulators, more sustainable materials can gain market share.”
Building a platform for sustainable growth
With many institutional investors eager to demonstrate a positive contribution towards the United Nations’ Sustainable Development Goals (SDGs) alongside their return objectives, Schroder’s new SISF Sustainable Infrastructure fund will aim to provide capital to global companies that are supporting the development of sustainable relevant assets such as energy utilities, renewable energy, water and waste utilities, and rail and communications networks. The strategy will be managed by Ashley Thomas, who said: “Existing infrastructure networks are in urgent need of expansion and replacement as they will experience an unprecedented combination of pressures over the next 30 years. The OECD estimates that $6.9 trillion per annum of investment is required by 2030 to meet climate and development objectives.”
While capital has been flowing into lower carbon technologies in recent years, there has been a lack of joined-up thinking in many areas, which greatly hinders progress. Thomas believes there are many opportunities for investors in projects aimed at filling in these crucial gaps: “While investment in renewable energy has more than doubled over the past decade to around $600 billion per annum, grid investment has been static at around $300 billion per annum. However, to reach national climate goals, grid investment needs to double by 2030 with more than 80 million km of grid length required to be built or replaced by 2040 – the equivalent of the entire existing global grid.”