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Green equities could experience tailwinds in the autumn

Sustainability may attract heightened attention in the coming months – both political and in the financial markets, estimates Danske Bank’s investment strategist.

Sustainability could become a theme of great interest and offer attractive opportunities for return in the autumn, notes Danske Bank’s investment strategist, Lars Skovgaard Andersen.

“The UN’s sombre Intergovernmental Panel on Climate Change (IPCC) Report, released on 9 August, has reinforced the focus on the green transition, and the theme could enjoy further tailwinds ahead of the COP26 climate conference in early November. Furthermore, German parliamentary elections on 26 September could have sustainability as an area of political focus – not least after the catastrophic flooding in Germany in July,” says Lars Skovgaard Andersen.

Sustainability is therefore a theme he currently recommends investors to consider in their portfolios.

“I see a fair probability of sustainable equities and green themes outperforming the equity market in general this autumn,” says the investment strategist.

Green energy is a focus area around most of the world, and I expect that will remain the case for many years to come.

Lars Skovgaard Andersen

Senior investment strategist, Danske Bank

Crucial issues
Lars Skovgaard Andersen highlights climate as a key area with great growth potential:

“Sustainability is much more than climate, but global warming and air pollution are, nevertheless, crucial issues. Air pollution in Beijing, for example, is so bad that it is the equivalent of smoking 40 cigarettes a day, and the Chinese are spending huge sums on the green transition of the transport sector, etc. Green energy, meanwhile, is a focus area around most of the world, and I expect that will remain the case for many years to come,” he says.

The US passed a symbolic milestone in 2019, when the country for the first time obtained more energy from renewables than from coal, though in the bigger picture this was just a modest step on the road towards the greening of the energy sector, according to Lars Skovgaard Andersen.

“In Europe, 85 per cent of electricity is expected to come from renewables by 2030, which is around double that of China and the US, but this still requires massive investment, which will benefit the best and most talented companies in the area,” he says.

How can investors promote a sustainable future?
”One possibility is to invest in so-called sustainable funds. These are also called article 9 funds and have the highest level of focus on sustainability. Sustainable funds invest in activities that contribute towards solving some of the challenges facing the planet. That may include investments that have a low climate impact or investments in activities that secure clean drinking water, reduce energy consumption, increase biodiversity, cut pollution or ensure greater social equality.”

Another option is to invest in companies that support sustainable development – for example, within themes like green energy, electric vehicles, clean water supplies and waste management. Typically, however, we recommend investing in these types of themes via equity funds, where your money is spread across a great many companies. This makes investors less vulnerable to negative developments in individual companies, plus it can be difficult to foresee exactly which companies will be the long-term winners,” says Lars Skovgaard Andersen.

This content is not investment advice - you should always speak to an advisor about how a possible investment matches your investment profile before making an investment.