Investment gratitude: what Elite Rated managers are thankful for
Thanksgiving is just around the corner, a holiday that doesn’t always get the best rep (both inside...
Tuesday night was the first US Presidential Debate and it was…well, let’s just say if you were watching it with popcorn it didn’t disappoint for late night entertainment. But that’s probably the best that can be said about it – other than the fact that moderator Chris Wallace was a great reminder that nursery school teachers are underpaid! Honestly, it was a long 90 minutes, especially as the rules of the debate were still being explained in the final minutes. Biden snapping “Will you shut up, man?” did almost make it worthwhile.
So, why am I recapping a horrible display of politics, which was more childish arguments and who could talk over whom, than an actual political debate? Because this US election is incredibly significant – not only to millennials but also Gen Z in terms of voting power. According to the Pew Research Centre, millennials became the largest demographic within the US electorate in 2019*, overtaking the Baby Boomers for the first time. And, if you add in Gen Z, some 20 million individuals* will also have their say on the choice of the next US President.
‘That was a hot mess inside a dumpster fire, inside a train wreck’ — CNN host, Jake Tapper, when asked to sum up the Presidential Debate
2020 has brought with it a lot of challenges and it’s also brought the anger and frustration of younger generations to the front-page. We’ve had environmental activism, the Black Lives Matter movement and protests. Social issues have been brought to the forefront and this changing dynamic – this dialogue – could define the November President election. It could also influence how companies operate. If an entire generation expects the government ‘to do more’, what’s stopping them from asking the same of their investments?
Although Trump won’t concede climate change is due to human activity, the majority of younger generations disagree*. Environmental issues are a key concern for millennials (and Gen Z) and while I don’t have official statistics, I’m pretty confident that’s not going to change. According to research from Goldman Sachs, “whilst Democrats have traditionally been more environmentally-minded, young Republicans are showing a greater leaning towards environmental issues than older Republicans.” A key issue was prioritising alternative energy sources – namely wind turbines and solar panels. VT Gravis UK Infrastructure fund currently has 18.1% and 15/9% invested in solar and wind respectively, with another 3.8% in renewable energy**.
Out and out environmental fund, Pictet Global Environmental Opportunities, only invests in companies which operate within a safe space for nine environmental challenges and actively contribute to solving those issues. It’s more than just climate change: it’s ocean acidification, biodiversity, pollution control, even sustainable packaging. Ninety One Global Environment is another option that also has a unique approach of only investing in companies that are contributing to the decarbonisation of the world economy. Manager Deirdre Cooper explained more in her interview back in February.
Who doesn’t love a bit of controversy? With speculation about what happens if and when Trump refuses to accept a Biden victory and sidestepping the question at the debate and again saying mail-in voting was already leading to fraud…it does leave one wondering if the US market is a good place to invest your capital today. In a recent podcast, James Thompson from Rathbone Global Opportunities had this to say: “Investors are expecting the unexpected: disputed results, lawsuits and civil unrest. And, you know, it can’t be taken off the table. Actually, I think the outlier event, the one that people are expecting the least, is a smooth vote: a clear result and calm transfer of power. This would be good for all global stock markets.”
The already infamous “are you willing tonight to condemn white supremacist and militia groups?” question from Chris Wallace at the debate, has led to Trump asking them to “stand by”. Not exactly comforting words. Arguments ensued about defunding the police, healthcare and even featured Biden calling Trump a racist on national television. But social issues aren’t just political or social.
Our most recent podcast with Katherine Kroll from Brown Advisory talks in depth about social issues and why they have taken a back seat in investment research for so long. We cover the Black Lives Matter movement, AI ethics and environment issues which disproportionally effect people of colour. I highly recommend a listen.
Social issues can be a more direct investment opportunity as well. At the height of lockdown we spoke to Noelle Cazalis, co-manager of Rathbone Ethical Bond fund, who explained how social bonds work and about a Covid bond they invested in back in April.
*Source: Pew Research Centre. For this study, millennials refer to population ages 23 to 38 as of 2019.
**Source: fund factsheet, 28 August 2020