"And while those themes are environmental, they are also social – they are about public health. If a house is not insulated properly, that is unhealthy for the people who live there.”
The other area Paracha says will be a significant future theme is agricultural technology. She says a combination of a desire for agriculture to be more carbon-efficient and a desire from politicians and the public to have greater food security will mean much innovation happens in this area in the future.
In the fixed income universe, Noelle Cazalis, who jointly runs the Rathbone Ethical Bond fund, says that while much of the product that has come to market in recent years has been focused on the environmental, or E in ESG, she anticipates that social housing, which is part of the social S theme within ESG, will be a growth area in future.
She finds this to be an attractive investment theme as the revenues are often linked to social security or other predictable sources of cash flow.
Transitioning companies
Nathalie Wallace, global head of sustainable investing at Natixis, says the evolution that has occurred to date has happened because retail clients are less interested in the old-style exclusion ESG strategies, which are premised solely on avoiding companies that are not ESG compliant.
She says retail clients, in her experience, increasingly want portfolios that are ESG compliant but that also have a positive impact on society.
Narina Mnatsakanian, executive director – sustainability centre at Van Lanschot Kempen, says: “The world is currently undergoing a lot of changes and transitions. It is important to find companies that are willing and able to adapt and become leaders in these emerging themes.
"Some of the most important transitions that we see are energy transition, food and agriculture transformation to include more sustainable, regenerative and biodiversity-friendly practices.
"Finally, materials transition will help us more towards a more circular economy. Companies that are able to navigate energy, food or materials transitions could be the next generation of winners.”
Duncan Goodwin, who runs the global sustainable growth fund at Premier Miton, says: “The next generation of sustainability investments will be in companies that can provide new solutions to old challenges.
"Energy transition remains at the forefront of sustainable investing and newer technologies such as hydrogen and the next generation of energy storage batteries could see a step change in the ability to de-carbonise.
"In addition to fuel, the availability of affordable and healthy food is another great global challenge and one for which new farming techniques, both in and outside of the lab, look set to enter the investment mainstream.
