Why this market theme is ripe for active investing

The global community is currently embarking on one of the biggest transitions since the Industrial Revolution. And no, I’m not talking about AI (although that is also, clearly, a disruptive megatrend).

I’m speaking of the transition to net zero and the goal of ensuring that we can all live our lives productively whilst having fewer negative impacts on the planet.

Around this goal are wrapped three little letters, which have become a lightning rod for the extremists on both ends of the spectrum: E-S-G.

ESG is often misunderstood because there is no universally accepted standard in the same way there is for, say, accounting. But there are some important caveats here. Accounting standards have taken 7,000 years to develop and are backward-looking. ESG has been around for about 20 years and, as Jonathan Bailey from Neuberger Berman points out:

“The problem with something like net zero or the climate transition is it is, by definition, forward-looking. It's about a transition to something in the future”.

So, here you have a new regulatory framework being developed for something that is in its infancy and is constantly evolving. 

Despite those challenges, practical opportunities are being created that investors are already embracing, and will continue to do so. Furthermore, because opportunities are developing and evolving in real time, they are ripe for active investors. 

As Bailey puts it, “There are areas like cement, steel, chemicals, fertiliser, transportation, where it isn't simply a case of divesting your way to an outcome. We're going to need steel and cement and fertilisers. "

"It's about finding those companies that are being thoughtful and long-term and are investing their precious capital in the solutions and the evolution of their business model to take advantage of the changes that are happening around us".

In the following Views from the Top, Bailey outlines his investment philosophy, shares insights from working with both governments and asset managers on sustainability, and explains why active investing is critical to achieving net-zero outcomes.

He also shares a couple of case studies where positive outcomes were achieved and where he is finding the best opportunities right now.  

Please note: This interview was filmed on Friday, 16 February, 2024

Time codes

0:00 - Intro
0:20 - Jonathan's investment philosophy
1:00 - How governments and asset managers view sustainability
2:43 - No universal standard and the related challenges
4:18 - The limitations of passive investing
5:40 - Voting initiatives and why they are important
7:30 - How receptive are companies?
9:00 - Rising interest rates and their impact on climate investing
10:35 - More than just the 'E'
12:04 - The most promising opportunities
13:32 - Jonathan's View from the Top

Seeking the sustainable winners

To learn more about Neuberger Berman's Global Sustainable Equity Fund, please visit their website, or the fund profile below. 

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Neuberger Berman Global Sustainable Equity

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