Three sustainable investment themes for a low-growth future – Hermes
26 Apr 16
As the world wakes up to the new reality of extremely slow growth, there seems little doubt the returns investors became accustomed to during the ‘Great Moderation’ are a thing of the past.
The conversion of the earth’s land surface to urban use is one of the most irreversible human impacts on the global biosphere. As a consequence, huge demand is being created for private and public sector infrastructure development – in areas such as power stations, electricity grids, water supply and treatment plants, roads, railways, airports, bridges, telecom networks, schools and hospitals. As with water, investment opportunities are prevalent across the capital structure – from micro finance and community development, through to infrastructure and real estate assets.
Today, more than 50% of the world’s population live in cities – a figure anticipated to grow to over 60% in the next 10 to 15 years. There will be limitless opportunities for infrastructure companies, as the urban projects of the next few decades will be financed by a combination of public finance and private contractors. Equity capital, municipal and corporate bonds, project finance, public private partnerships, private finance initiatives and bank syndicated loans will all represent opportunity for sustainable investment.
The rush to urban centres, particularly in emerging economies, is driven by a desire for an improved lifestyle and greater opportunities. Thriving cities must support businesses by providing connections to distinctive talent pools and critical resources. Environmental management must also be integrated into the plan.
We have seen this in the redevelopment of King’s Cross, with the entire area experiencing substantial regeneration, while delivering a healthy return for investors. Developments of this nature represent incredible investment opportunities, with genuinely positive environmental impacts to play out over decades to come.
Tags: Investment Strategy
