Circular bio-economy
Outcome-oriented economy
Resource efficiency
Zero-waste
Sharing & repair
Outdoor activities
Dematerialisation
Green & innovative finance
Performance materials
Industrial automation
(Industry 4.0)
Biomaterials
Smart farming
Water solutions
Waste & recycling
Innovative infra & urbanisation
Smart food supply chains
Timeline:
Our Natural Capital Strategy in 2022
Scroll down to explore the events of the last year
Dec - Jan
Feb - Mar
Apr - May
Jun - Jul
Aug - Sep
Oct - Nov
AUGUST 2022 -
SEPTEMBER 2022
Investment view
Policy progression
Three macro trends – inflation, supply-chain disruption and
onshoring – support our bioeconomy and waste and recycling sub-themes:
These shifts support the development of alternative, resource-efficient and nature-inclusive solutions. Recycling, bio-based fertilisers, product design integrating reuse and repair, and improved food formulations allow for greater resilience among global supply chains and benefiting nature. This demand is here to stay, in our view.
Investment view
China commits to preserving nature as part of its national development by pledging to eliminate heavy air and water pollution, and to control soil contamination. This provides strong potential demand for environmental analysis, management and remediation companies globally with operations in China, and local players.
Policy progression
Policy progression
Investment view
DECEMBER 2021 -
JANUARY 2022
Investment view
The equity-market rotation to value continues, embedding a trend that would persist into the new year. With inflation proving sticky, markets price-in steeper interest-rate hikes.
Our focus remains on attractively valued high-quality companies.
Policy progression
The EU Taxonomy releases a law specifying the nature and disclosure of environmentally friendly business activities, driving greater corporate transparency.
Dec - Jan
Feb - Mar
Apr - May
Jun - Jul
Aug - Sep
Oct - Nov
Policy progression
Investment view
FEBRUARY 2022 -
MARCH 2022
Investment view
Russia’s invasion of Ukraine shocks markets, triggering risk-off sentiment and intensifying inflation as prices rise for energy, hard commodities and agricultural commodities like wheat and fertilisers.
Before the conflict, we had built an overweight to consumer-staples companies after identifying pricing anomalies. But higher soft-commodity prices and cost pressures for consumers become unexpected headwinds.
Energy producers and power utilities – which are not part of the natural capital theme and are therefore portfolio underweights –
re-rate higher due to increasing prices.
Policy progression
The Biodiversity Beyond National Jurisdictions Treaty is launched, covering 95% of the world’s oceans.
The ‘Paris Agreement for plastics’ – or UN Environment Agency Plastics Accord – is struck.
Also, cases for ‘plastic credits’ and an ‘IPCC for chemicals’ are made. These developments provide further tailwinds for companies aligned with the rise of recycling, biomaterials and share, reuse and repair.
Dec - Jan
Feb - Mar
Apr - May
Jun - Jul
Aug - Sep
Oct - Nov
Policy progression
Investment view
APRIL 2022 -
MAY 2022
Investment view
As war in Ukraine and inflation intensify, investors weigh a gamut of risks as volatility increases:
• Europe’s energy crisis
• Concerted, aggressive monetary-policy tightening
• Global cost-of-living pressures
The size of our universe and flexibility of our EER investment process enables us to implement barbell positioning, featuring both growth and value exposures while maintaining a strong quality bias. This becomes characteristic of our portfolio in 2022 and helps to stabilise relative performance.
As the Federal Reserve hikes rates by 50bps, ahead of four consecutive 75bps increases, we focus on heavily discounted, quality companies that can fund their own growth.
Policy progression
Freshwater overuse becomes the sixth planetary boundary to be crossed, stressing the need to accelerate the adoption of efficient water systems and closed-loop models.
In the US, the FOREST Act, seeking to ban products linked to illegal deforestation and prosecute perpetrators, enters formal review. It is introduced to Congress in October. Our engagement efforts throughout 2022 target deforestation policies among companies.
The UK’s Plastic Packaging Tax, applying to domestic and imported packaging with less than 30% recycled plastic, comes into force.
Dec - Jan
Feb - Mar
Apr - May
Jun - Jul
Aug - Sep
Oct - Nov
Policy progression
Investment view
JUNE 2022 -
JULY 2022
Investment view
The natural-capital thematic benefits from higher inflation and interest rates: elevated commodity and fertiliser prices empower farmers to upgrade to precision-farming technologies in order to better manage costs, increase efficiency and enhance yields.
This supports selected holdings in our sustainable food systems sub-theme.
Policy progression
The EU proposes a Nature Restoration Law seeking to repair 80% of damaged habitats and reduce pesticide use by 50%. It is a key element of the bloc’s biodiversity strategy, and one of the main demand drivers for our innovative urbanisation sub-theme.
The TNFD launches the Nature-related Data Catalyst to accelerate the development and sharing of analytical risk tools. More than 80 organisations have since joined.
Dec - Jan
Feb - Mar
Apr - May
Jun - Jul
Aug - Sep
Oct - Nov
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Geopolitical risk is disrupting the flow of commodities from specific regions, making biological alternatives more attractive
Logistical challenges restrict access to new materials, increasing appetite for recycled goods, such as aluminium
Higher prices for incumbent inputs have seen many biomaterials achieve cost parity
Policy progression
Investment view
OCTOBER 2022 -
NOVEMBER 2022
Investment view
Volatility continues ahead of an expected global recession in 2023. Indicators show that inflation is decelerating in the US but still climbing in Europe. Markets take heart in China’s tentative steps towards easing its zero-covid policy.
We stay focused on quality companies whose resilient cashflows, economic moats and market positions provide a stronger likelihood of maintaining pricing power to protect margins. The growing strength of the natural-capital thematic provides a potential source of de-correlation to recessionary conditions.
Policy progression
The UK publishes natural capital accounts for 2022 to estimate the financial and societal value of the country’s natural resources, marking a decisive step towards an improved way of valuing nature.
Dec - Jan
Feb - Mar
Apr - May
Jun - Jul
Aug - Sep
Oct - Nov
Back to top
Toxic waste, including plastic pollution, becomes the fifth
planetary boundary to be crossed, emphasising the urgent need
for the rise of the circular bioeconomy, one of our sub-themes.
To help ensure that products sold in Europe do not contribute to deforestation or forest degradation anywhere in the world, the EU sets specific due diligence rules for companies.
The US seeks public comment on a draft national strategy for a
system of natural capital accounting.