PLACE FINANCIÈRE & MARCHÉS — Fonds

contribution - Alfi

Responsible & profitable



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Fabien Vrignon, CEO de Keytrade Luxembourg. (Photo: Keytrade Luxembourg)

20 years ago, more and more ethical and ESG (Environmental, Social and Governance) funds were being created. Nonetheless, although professionals invested a lot to distribute those funds to retail customers, they were not a huge success.

For about two years now, there has been a real shift in people’s mindset mainly on three different issues: ESG funds are outperforming, the offer is booming and our personal responsibility with regard to tomorrow’s challenges is increasing. Global warming, Earth Overshoot Day coming earlier every year, and ESG funds are showing huge potential in terms of tackling these and other challenges such as population growth, an aging population and the new way of consuming.

ESG funds are outperforming:

- Historically, distributors stammered in the face of a customer asking: does it really perform? Now, after years and )- years of good results and performance, ESG funds are outperforming others.

- The result: in 2018, $11.6 trillion were invested by funds in ESG criteria, 40% more than two years before.

We became responsible:

- In recent years, we have seen a “Green Wave” all over the world and the last European election results were an indication of the huge increase in interest for our environment.

- Consumers, investors, governments… everybody rails against non-sustainable sectors. Polluting companies, those that use child labour are almost blacklisted, and everybody is trying to act by reducing consumption in order to improve air quality, fairness, justice and fiscal equity.

Huge potential

- The forecasts are good when you look at the potential for ESG funds, and this is where YOU, the investor, will find the performers of tomorrow.

- Environmentally speaking, the issue of global warming has reached a consensus. “Save the planet” is trendy and investors like it! There are plenty of issues which have to be tackled.

Decrease pollution:

- Water: limit its pollution by using fewer pollutant products. Invest in technologically advanced companies to replace plastics.

- Air: improve air quality. Invest in cleantech funds which help to decrease gas emissions by developing green energy production.

- Energy production: how to decrease this pollution while the global population continues to increase remains a big challenge worldwide. There are two ways of thinking. First, Malthusianism, infinite growth in a finite world, is impossible so we need to reduce population growth. Secondly, the belief in the possibility for humanity to be self-sufficient by increasing its productivity or finding new ways to use resources (for example, the hydrogen car).

- Invest in global environment funds which focus on the environment, sustainable natural resources or the companies that are engaged in this area.

- To produce less and use resources more efficiently: Jeremy Rifkin, in his book The Zero Marginal Cost Society, suggests that people no longer want to buy something that they could use without owning it. This prediction has been steadily becoming a reality in recent years and the trend is clearly rising: invest in sharing platforms (cars, real estate, goods in general).

- Less transportation and local consumption: invest in local companies or global companies with a focus on this topic.

- Population increase: in 1960, we were 3 billion on earth, today we are 7.7 billion; and in 2050, we are expected to be 10 billion.

You can invest in so many sectors to follow this trend:

- Invest in geographical areas: where the populations are growing, mainly in Africa; invest in specific sectors (raw materials, food).

- Aging population: in 1960, the median age in the world was 23 years old. Today, it is 31, and in 2050, it will be 36. Invest in the health sector, of course, mainly in Europe and North America where the percentage of seniors is the highest. Invest in luxury travel, the older you are, the less you want to camp! Cruises and luxury hotel chains are a good sector too. The wellness sector also has a bright future.

In conclusion, I would say, let’s embrace the “Save the planet” wave. Be altruistic by helping to improve the Earth’s future and selfish by investing in this area which is already showing huge potential. Let’s make true this motto of the free marketer Bernard Mandeville: “Private vices, public virtues” by investing in sustainability and green funds.

More news on the fund industry in  Paperjam’s Alfi  supplement.