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ESG New Trends Survey

Lack of formal regulatory definition for "Sustainable Investment" has resulted in a broad investment universe that might vary among investors. Renewables have probably become one of the most popular sustainable investment directions.

However, there are much more attractive sectors that can be viewed as both sustainable and  profitable. Based on our desk research, 4 sectors were identified that are likely to grow in their popularity among ESG investors in the future.

We would like to know your opinion about our choice and, therefore, invite you to participate in a short ESG survey. The results of the survey will be published as a part of "ESG Trends" article. Our survey will not take more than 5 minutes of your time. 

If you are a great ESG enthusiast and want to meet like-minded people, we are pleased to invite you to the CFA UK Sustainability Community Champions where The sustainability and ESG challenges are explored by like-minded professionals.

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* 1. Are you working in ESG-related field*?

*please tick “Yes” if you are directly or indirectly exposed to ESG field i.e. ESG investment, research, compliance, consulting and similar.

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* 2. Below we will briefly describe 4 sectors that might be potentially attractive for sustainable investments. Please read the description of each sector and answer the questions.

Water Infrastructure: Climate change, including more frequent droughts and storms, has intensified the risk of water shortages in both developed and developing countries. Moreover, inability of public utilities, responsible for water supply, to pass on costs to consumers have led to years of underinvestment in water infrastructure. This resulted in outdated water systems and frequent leaks, exacerbating water scarcity problem. Given the decline in supply and increase in demand for freshwater observed in the past few years, the price of water assets is expected to rise in the near future. Therefore, current water infrastructure investors might be rewarded with significant cash flows in the medium and long term.

Would you invest in “Water Infrastructure” in the next 2-4 years?

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* 3. Energy Infrastructure: The global shift to clean energy has spurred investments in renewable energy production. However, there have been significantly fewer investments in renewable energy storage and distribution infrastructure. One reason for this is the lengthy process of obtaining permissions for large infrastructure projects, which can take years, particularly in developed countries. Another factor is the rising construction costs associated with higher prices of essential materials such as aluminium, copper, and steel. Additionally, the increase in labor costs has also impacted the profitability of energy infrastructure projects. Despite these challenges, renewable energy storage and distribution systems are essential for a successful transition to clean energy. Therefore, the demand for upgraded power systems is expected to rise in the near future, making this sector attractive for investments.

Would you invest in “Energy Infrastructure” in the next 2-4 years? 

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* 4. Green Hydrogen: Hydrogen is a clean energy source that produces only water when used as fuel. Green hydrogen is produced through electrolysis, a process that separates water into hydrogen and oxygen using electricity from renewable sources like wind or solar. It plays a crucial role in decarbonization of industries where fossil fuels cannot be easily replaced such as steelmaking, chemicals, refineries, and heavy land, air, and sea transportation. However, the demand for green hydrogen has been low due to its higher production cost compared to fossil fuels. Additionally, the lack of infrastructure for large-scale storage and distribution of green hydrogen poses another challenge for its widespread adoption. Nevertheless, governments like the European Union and the UK have included green hydrogen in their “Net Zero” strategies. Therefore, it is reasonable to expect hydrogen subsidies, which could lower production costs, stimulate demand for green hydrogen, and make this energy source more attractive for investments.

Would you invest in “Green Hydrogen” in the next 2-4 years?

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* 5. Cold Storage: Cold storage sector plays a vital role in reducing food waste and associated carbon emissions. Companies in this sector operate temperature-controlled warehouses for storing chilled and frozen food. Recent technological advancements have allowed some companies to construct fully automated warehouses, utilizing software systems to handle product storage and movement without physical labor. The automation minimizes food product damage and reduces the risk of injuries to warehouse employees. Additionally, the warehouses are fully sealed and, therefore, can be operated for days without active refrigeration, which significantly reduces energy consumption compared to manual warehouses of similar size. From a financial perspective, the business model typically offers low volatility contractual cash flows from large food producers occupying the entire warehouse. Despite the positive social, environmental, and financial aspects, the cold storage sector has not received much attention from investors. However, the increasing demand for fresh food, relatively stable cash flows, and potential for mitigating environmental impact of business operations make this sector an attractive investment opportunity.

Would you invest in “Cold Storage” in the next 2-4 years?

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* 6. What factors prevent you from investing in any of the 4 sectors or in ESG assets in general?

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* 7. What other ESG themes would you consider for investment?

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* 8. If you would like to receive the ESG New Trends article and the results of the survey, join CFA UK Sustainability Community. It is free! Please leave your name, company and email below. Thank you.

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