Investors have long been warned that the current environment poses challenges to the 'new' sustainable economy. And they are starting to see performance lag. However, this should not be taken as the signal to avoid sustainable investments.
David Winborne, Senior Portfolio Manager at Impax Asset Management, says that it comes down to the long-duration nature of such investments. Addressing sustainability challenges is a long-term proposition and the pay-offs are in the future, rather than right now.
"Of course, when we have interest rates rising, it naturally penalises the long-duration assets more because you've got future cash flows that get discounted back at a higher rate. So, certainly, there has been quite a lot of pressure on some of these long-duration equities so far this year."
He argues the key to protecting your investments in the current environment comes down to steering clear of 'hyper-growth' companies. These are companies that have grown their top line rapidly, without delivering profitability.
In this edition of Expert Insights, David discusses the impact of inflation on long-duration sustainable investments, 'hyper-growth' companies, environmental scoring and some of the key risks they've identified in taking 'active ownership' of investments.
