Five funds investing in companies with pricing power
I don’t know about you, but it feels like my monthly wage just isn’t going as far as it used to. And...
World Oceans Day is held on the 8 June each year. Designated by the UN General Assembly in 2008, it’s a day to celebrate our personal connection to the sea, as well as to raise awareness about the crucial role the ocean plays in our lives and the important ways people can help protect it.
This year is especially important in the lead-up to the UN Decade of Ocean Science for Sustainable Development, which will run from 2021 to 2030. It will strengthen international cooperation to develop the scientific research and innovative technologies that can connect ocean science with the needs of society.
Oceans cover three quarters of the Earth’s surface, contain 97% of the Earth’s water, and represent 99% of the living space on the planet by volume.* It’s also key to the global economy: an estimated 40 million people will be employed by ocean-based industries like offshore wind energy, fishing and shipping by 2030. And together, these industries comprise roughly 3.5% to 7% of global gross domestic product**.
The World Resources Institute shows that every $1 invested in sustainable ocean solutions yields at least $5 in return**. According to the study, the benefits are not just financial – they represent economic, environmental, social and health benefits for local economies, communities, businesses and households.
“There’s nothing more beautiful than the way the ocean refuses to stop kissing the shoreline, no matter how many times it’s sent away.” — Sarah Kay, American poet
The ocean produces at least 50% of the planet’s oxygen and is home to most of the Earth’s biodiversity. And diminishing biodiversity in our oceans is the single greatest threat to the survival of humanity. Climate change is, of course, a direct pressure on global biodiversity but there are other factors having an impact, such as habitat stress and pollution.
Deirdre Cooper, co-manager Ninety One Global Environment, told us “climate change is a key risk for the ocean’s health, which has also been subject to destructive marine practices for decades. This has put the fish populations, their natural habitats and the ocean’s potential to continue operating as a natural carbon sink at risk.”
According to the UN, the ocean is the main source of protein for more than a billion people around the world. Investing in ocean-based food production can take on numerous forms, from improving fisheries and production of ocean aquaculture to more sustainable food sources. As the global population grows, investing in wild fisheries would help provide healthy diets for people while replacing carbon intensive proteins like beef.
John Bennett, manager of Janus Henderson European Focus, told us on the Investing on the go podcast about Mowi, a fish farming business in Norway. He tells us why he believes it’s the clear winner in the salmon versus red meat debate.
According to the team behind Ninety One Global Environment fund “the alternative meat/protein alternative industry is developing rapidly and, while exposure to this area is currently limited in the strategy, we are actively monitoring and researching potential technologies and viable investments.”
Offshore wind farms are part of a major push to get more electricity from renewable sources and in the last six months, growth forecasts for the renewable energy sector have hugely increased.
The team behind First Sentier Global Listed Infrastructure, believes “net Zero can only be achieved through a globally concerted effort to decarbonise the power generation sector; electrify the transportation sector; and find cost-competitive solutions to decarbonise the hard-to-abate sectors. Offshore wind power has a role to play in helping deliver this outcome. It can provide energy to highly populated coastal regions where energy needs are high and land resources are scarce.”
Mark Rodgers, co-manager of LF Montanaro Better World fund, told us about Siemens Gamesa Renewable Energy. “The company is the number one player with a market share of 70%, the largest installed base, and the largest order book in the industry,” he said. “They are delivering innovative solutions, such as 108 meter long turbine blades for the UK’s North Sea Sofia project. These turbines will be installed furthest from shore of any project yet undertaken by the company and power the equivalent of 1.2 million households.”
Both M&G Global Listed Infrastructure and VT Gravis UK Infrastructure Income funds also currently have exposure to renewable energy projects. The latter has 15.5%*** invested in wind projects specifically.
According to Noelle Cazills, co-manager of Rathbone Ethical Bond fund, “the blue economy is valued at €1.3 trillion, so protecting marine ecosystems and promoting better fishing practices will help economies to be more resilient. Protecting coastlines and ecosystems also creates a huge social impact and ensures jobs are protected, in the tourism and hospitality industries for example.
“Blue bonds are one way to finance such projects. The money raised is directed to specific projects, with “blue” credentials and investors get regular reporting on what the bonds have financed.”
As Noelle concludes, “you can see how these instruments are crucial to tackle the challenges raised by the UN Sustainability Development Goal 14 “Life Below Water”. As ethical investors, we are constantly seeking for investment opportunities, but so far they are very scarce.”
Learn more about blue bonds in an interview with Noelle
*Source: UN Sustainable Development Goals
**Source: World Resources Institute, 4 Investments to Secure Ocean Health and Wealth, July 2020
***Source: fund factsheet, 31 March 2021