How to Buy
          11 min. read
          Thematic Commentary 29 December 2023

          Thematic Commentary – 29 December

          Thematic Investing

          Written by: Tom Barker, CAIA

          Published: 12 January 2024

          Close
          Forest, nature, outlook

          In today’s rapidly evolving market, investors need to stay on top of the latest trends and themes that fuel growth. In this monthly publication, we offer our market commentary across our themes, covering new opportunities and potential challenges. By providing a deeper understanding of our themes, we aim to help you make more informed investment decisions and achieve your investment goals.

          Circular Economy Enablers

          Dutch food company Upfield, known for brands like Flora and Becel, plans to introduce paper-based tubs for all its plant-based spreads in 2024. This development marks a notable innovative milestone in the sustainable packaging industry. Existing paper-based packaging solutions use plastic coating to prevent leaks, particularly from liquids and oil-based products. These pose challenges as the coating needs to be removed before the recycling process can begin. The new tubs, developed in collaboration with US-based materials group Footprint, are made from compressed wet paper fibres and use a coating made from a non-plastic material, which should ultimately lead to a higher recycling rate. The tubs will debut in Austria, the Netherlands, the UK, and Germany, expanding to other European countries by 2025. Upfield expects the packaging to be certified as compostable by next year. The move aims to address concerns over single-use plastic amid a regulatory and consumer-driven push for eco-friendly packaging in the European Union.1

          Environmental Impact 100

          The year 2023 was a landmark year in the field of clean energy, marked by significant achievements and milestones. Tesla, the electric vehicle (EV) manufacturing giant, reached peak sales, underscoring the growing global appetite for electric transportation. This surge in EV popularity was mirrored by a continued decrease in battery costs, making electric vehicles more accessible and affordable for a broader range of consumers. Renewable energy also experienced a record expansion in 2023. The growth was driven by increased installations of solar and wind power facilities worldwide, as these technologies became more cost-competitive compared to traditional fossil fuels. This growth in renewable energy capacity was crucial in driving down global carbon emissions and advancing towards the goals set in international climate agreements. These developments were bolstered by significant international events like COP28, where global leaders converged to reaffirm and strengthen commitments towards achieving a sustainable and clean energy future. The discussions at COP28 emphasised the urgency of transitioning to renewable energy sources and the need for international cooperation to address the challenges of climate change.2

          Eco-friendly product packaging in EU

          Global Sustainable Infrastructure

          In December we saw several developments that demonstrate ongoing efforts to promote sustainable infrastructure projects, reflecting growing global focus on environmental and climate considerations in infrastructure development.

          The Government of Costa Rica announced the creation of a Project Preparation Facility (PPF) to strengthen public investment and infrastructure resilience to climate change, support its decarbonisation efforts, and reinforce the ability of its financial sector to assess and manage climate-related risks.

          The Infrastructure Sustainability Learning (ISLe) Initiative aims to accelerate the development of climate-smart infrastructure through virtual knowledge sharing. This initiative is part of the global effort to curtail global temperature rise and promote sustainable infrastructure development. It is expected to free up capacity among local government officials, engineers, developers and financiers, helping to solve a key barrier in the sustainability challenge.

          Finally, The Institute for Sustainable Infrastructure (ISI) recognised organizations that have been with ISI for ten years as of December 2023, highlighting the growth and development of sustainable infrastructure initiatives.3 4 5

          Sustainable Future of Food

          The 28th session of the Conference of the Parties (COP28) to the UN Framework Convention on Climate Change took place from November 30 to December 12, 2023, in Dubai, United Arab Emirates. It marked a significant turn in addressing food systems within climate action. Key highlights included the Global Stocktake acknowledging food’s critical role in climate response and the launch of the Alliance of Champions for Food Systems Transformation (ACF) led by countries like Norway and Brazil. These initiatives underscored the urgency of sustainable agricultural practices and climate-resilient food production. The United Nations FAO’s roadmap was also unveiled and is set to revolutionise agrifood systems, targeting their transition to carbon sinks by 2050. By focusing on areas like livestock and crop practices, the plan aligns with the Paris Agreement’s 1.5-degree limit and aims to eradicate world hunger. More recently, Netflix’s documentary ‘You Are What You Eat’, released in January 2024, highlights the significant impact of diet on health and environment. Featuring an experiment with identical twins, it vividly demonstrates how different diets affect physical and mental health. This series is expected to amplify consumer awareness in the US and globally, encouraging a shift towards sustainable food choices. Its alignment with the FAO’s roadmap symbolises a key moment in progressing towards sustainable, health-focused food systems.6

          Bridge, infrastructure, public transportation

          USA Environmental Impact

          The year 2023 was a landmark year in the field of clean energy, marked by significant achievements and milestones. Tesla, the electric vehicle (EV) manufacturing giant, reached peak sales, underscoring the growing global appetite for electric transportation. This surge in EV popularity was mirrored by a continued decrease in battery costs, making electric vehicles more accessible and affordable for a broader range of consumers. Renewable energy also experienced a record expansion in 2023. The growth was driven by increased installations of solar and wind power facilities worldwide, as these technologies became more cost-competitive compared to traditional fossil fuels. This growth in renewable energy capacity was crucial in driving down global carbon emissions and advancing towards the goals set in international climate agreements. These developments were bolstered by significant international events like COP28, where global leaders converged to reaffirm and strengthen commitments towards achieving a sustainable and clean energy future. The discussions at COP28 emphasised the urgency of transitioning to renewable energy sources and the need for international cooperation to address the challenges of climate change.7 8 9

          Cybersecurity and Data Privacy

          The Magnificent 7 (“MAG7”) technology mega caps had a stellar 2023 posting double- and in some cases even triple-digit returns. They accounted for a significant portion of the performance seen in market-capitalisation based broad market indices such as the Nasdaq-100 and MSCI World. Yet another winner also emerged last year, cybersecurity. All these success stories were bolstered by developments in generative artificial intelligence (“A.I.”) and the prospect of a declining rate landscape. However, cybersecurity as an investible theme remains a diversified index of 29 companies with recent performance distributed across the entire industry. Meanwhile, the MAG7 remain a source of significant concentration risk in broad indices, and whilst many investors now question their expensive valuations, the overall cybersecurity leading P/E ratio currently sits at 29.9x, more than 1 standard deviation below the mean value of 40.0x during the period since the index inception. These attractive valuations remain anchored by strong earnings expectations for cybersecurity companies despite recent price appreciation. Their growth is supported not only by innovation and AI but also by the relentless surge in ransomware attacks and the ever-increasing network of interconnected devices.10 11

          Digital Payments Economy

          The Cryptoeconomy continued its resurgence in December with markets closely watching the potential approval of spot Bitcoin ETFs by the Securities and Exchange Commission (SEC) which is expected to drive increased institutional participation in the market. These regulatory developments and ongoing technological advancements have supported positive sentiment for cryptocurrency. Coinbase Global, a cryptocurrency exchange and key provider of financial infrastructure in the space, saw its share price rise by over 125% in the final two months of 2023. The company has benefited by cementing its competitive advantage following issues at two key competitors, namely the collapse and bankruptcy of FTX as well as regulatory and legal challenges faced by Binance. The full impact of the evolving regulatory landscape remains to be seen but the asset class should benefit from a more secure and stable environment for investors with increased protection against fraud and market manipulation.12

          Device security, ransomware, cybersecurity

          References

          1

          Financial Times, “Plant-based spread maker tries move into paper-based tubs”, December 2023. Available at: https://www.ft.com/content/c225bbb2-de09-46dc-8050-71323eed59f1

          2

          Bloomberg, December 2023

          3

          Duke, “Infrastructure Sustainability Learning (ISLe) Initiative”, December 2023. Available at: https://nicholasinstitute.duke.edu/project/infrastructure-sustainability-learning-isle-initiative

          4

          Institute for Sustainable Infrastructure, December 2023

          5

          IMF, “Costa Rica Engages with Multilateral Partners to Launch a Sustainable Project Preparation Facility and Crowd in Climate Investments”, December 2023. Available at: https://www.imf.org/en/News/Articles/2023/12/01/pr23418-costa-rica-multilat-launch-sustainable-project-prep-facility-crowd-climate-investments

          6

          COP 28, “Cop28 Presidency Puts Food Systems Transformation On Global Climate Agenda As More Than 130 World Leaders Endorse Food And Agriculture Declaration”, December 2023. Available at: https://www.cop28.com/en/news/2023/12/COP28-UAE-Presidency-puts-food-systems-transformation

          7

          YahooFinance, “The 7 Best Clean Energy Stocks to Buy in 2023”, March 2023. Available at: https://finance.yahoo.com/news/7-best-clean-energy-stocks-174948549.html?guccounter=1

          8

          Electrek, “The US has seen 5 years’ worth of clean energy investments in just 9 months – here are the highlights”, April 2023. Available at: https://electrek.co/2023/04/18/us-clean-energy/

          9

          Energy.Gov, “Biden Clean Energy Plan Update: March 2023”, March 2023. Available at: https://www.energy.gov/articles/biden-clean-energy-plan-update-march-2023

          10

          Rize ETF, December 2023

          11

          Bloomberg, December 2023

          12

          FXC Intelligence, December 2023

          Related posts

          • 1
          • 2
          • 3

          Select Your Country

          United Kingdom
          Germany
          Italy
          Switzerland
          Austria
          Denmark
          Finland
          Ireland
          Luxembourg
          Netherlands
          Norway
          Spain
          Sweden

          Select Your Investor Type

          ======