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Sustainability megatrends reshaping markets

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Sustainability megatrends reshaping markets

Technical innovation, regulatory action and changing consumer preferences are key drivers of the transition towards a greener society. As an investor, following these trends and taking sustainability issues in to consideration when investing, has proven to have an influence on returns.

As climate and environmental issues gain momentum on the global agenda, the pressure increases on companies to become more sustainable and reduce their greenhouse gas emissions. The EU has set ambitious climate targets that require both consumption and production to become carbon neutral in 2050 or earlier. In addition, there is an increased environmental awareness among consumers globally, which creates new trends and patterns of consumption.

For businesses, this can be a risk while also creating new opportunities. Regardless of industry, companies will need to raise issues of environment, social responsibility and corporate governance, so-called ESG factors, on to their own agendas in order to be able to compete and be profitable in the long-run. As an investor, following these trends and integrating sustainability into the portfolio have shown a positive or neutral impact on financial returns.

Karin Askelöf

Karin Askelöf, Head of Responsbile Investments at Handelsbanken Fonder, sees the benefits of sustainability-adapted portfolios:

Identifying a company's sustainability risks or refraining from investing in companies that do not conduct their business responsibly is important. We believe that in the coming years we will see large investments in, for example, climate solutions, water purification and energy efficiency. 

Handelsbanken Fonder's assessment is that companies who are at the forefront in terms of innovation and entrepreneurship in these areas also have a good chance to be tomorrow's winners.

Josefine Johansson

Josefin Johansson, Sustainability Analyst at Handelsbanken, looks ahead:

More and more countries are setting a price on carbon dioxide emissions, for example by introducing a carbon tax or emissions trading systems. Carbon pricing is going global, although the EU is still at the forefront regarding implementation with an emissions trading system being up and running since 2005. The price of European emission allowances (EUAs) has increased by more than 400 per cent since January 2017.

Our belief is that carbon pricing and trading programmes will continue to grow. These are currently the most effective tools to shift to a more low-carbon economy. This, in turn, can provide competitive advantages for companies that are at the forefront when it comes to carbon dioxide emissions efficiency, as they are potentially less sensitive to a rising carbon price. We also see increasing carbon prices as having a major influence in the shift away from coal and fossil fuels, towards renewables.