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          Thematic Commentary – 31 January

          Thematic Investing

          Written by: Tom Barker, CAIA

          Published: 10 February 2024


          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

          Solutions embracing artificial intelligence (AI) are playing a pivotal role in facilitating the transition to a circular economy. Take California-based robotics firm Urban Machine; this innovative startup utilises advanced AI and robotics to salvage construction-grade lumber from demolition projects, which would otherwise find its way into landfills. Its process extracts metal fasteners like nails, screws, and staples from the salvaged wood, ensuring its usability and quality. This significantly reduces the labour and cost associated with traditional wood reclamation methods. Moreover, the company’s AI capabilities accurately assess the quantity and quality of recovered wood at each site. Urban Machine offers its AI-enabled metal-extracting robot for rental to developers, contractors, and demolition companies, enabling them to repurpose wood waste on-site and minimise landfill contributions. Through disruptive innovation, Urban Machine is actively contributing to the circular economy by closing the loop on wood waste and promoting sustainable construction practices.1

          Environmental Impact

          According to the IMF, carbon-intensive fossil fuel subsidies in the US totalled a whopping $USD 757 billion in 2022.

          Recently, the Biden-Harris Administration has proposed measures to reduce fossil fuel subsidies as part of the FY 2024 budget. One avenue is implementing changes to tax preferences which could lead to substantial savings, estimated at nearly $USD 96.9 billion over the next decade. Additionally, the Inflation Reduction Act allocates $USD 1.6 billion to mitigate methane emissions, reflecting a concerted effort to address environmental concerns associated with fossil fuel production. Furthermore, legislative proposals such as the End Oil and Gas Tax Subsidies Act signify a growing consensus in Congress towards reforming the existing subsidy framework. This proposed legislation seeks to revoke tax breaks for the fossil fuel sector, aligning with broader goals of transitioning towards renewable energy sources. All these initiatives underscore a paradigm shift towards sustainable energy policies, signalling a departure from traditional support for fossil fuel industries. As the world grapples with the need to mitigate climate change, reducing subsidies to fossil fuels emerges as a crucial step in promoting cleaner energy alternatives which should drive significant growth in green transition companies.2

          Global Sustainable Infrastructure

          In January, US private equity firm General Atlantic announced its acquisition of the UK-based infrastructure investor Actis, expanding its assets under management to approximately $USD 96 billion.

          Actis will become General Atlantic’s sustainable infrastructure arm, with a specific focus on energy transition, digital transition, and supply chain transformation. Traditional infrastructure allocations, in any case, offer limited exposure to these growth areas, but we believe they are fundamental aspects of the sustainable infrastructure transition. This sentiment was shared by General Atlantic’s CEO, Bill Ford, who noted significant opportunities in energy transition, particularly in regions like the ‘Global South’. The acquisition of Actis exemplifies the increasing momentum and investor confidence in the expansion of sustainable infrastructure ventures worldwide.3

          Sustainable Future of Food

          At the COP28 U.N. Climate Change Conference last year, which focused significantly on sustainable agriculture and food systems, Karen Ross, Secretary of the California Department of Food and Agriculture (“CDFA”), highlighted the climate crisis’s impact on California’s farmers and proposed solutions. Emphasising the urgency of transitioning to sustainable food practices, Ross addressed challenges such as water shortages, invasive species, and extreme weather events, stating, “We’re living our future now.” The CDFA aims to support farmers by investing in climate-smart agriculture, including groundwater recharging and practices like cover cropping and composting. Meanwhile, Fresh Del Monte, an innovative sustainable food company, is actively contributing to these efforts. By dedicating 30% of its privately owned land to conservation efforts, it has been experimenting with regenerative agriculture methods such as composting and cover cropping. This initiative not only improves biodiversity but also reduces emissions, with a reported 26% decrease in 2022. Fresh Del Monte aims to scale these practices to all farms by 2030. Its commitment illustrates leadership in sustainable agriculture and alignment with the sustainable agriculture objectives of COP28.4 5

          Cybersecurity and Data Privacy

          The cybersecurity threat is constantly evolving not just in terms of sophistication but also in how strategies are employed. A recent example involves Volt Typhoon, a Chinese state-sponsored hacking group which is rethinking its approach to cyber warfare. Its command of sprawling botnets, which enable malicious actors to remotely control a network of compromised devices, has been used to plant foothold malware in key infrastructure such as utilities and energy companies. This marks a departure from more traditional ‘hack and spy’ operations and positions for launching disruptive attacks down the line, potentially in response to conflicts involving Taiwan or the South China Sea. In January, the FBI was able to send a remote kill switch to vulnerable routers infected by the “KV Botnet” malware used by the group. Despite these disruptions to Volt Typhoon’s infrastructure, experts anticipate only temporary setbacks as the group is likely to rebuild and adapt. Nevertheless, collaboration between government agencies and cybersecurity firms is improving detection and response capabilities, bolstering defenses against future attacks.6

          Digital Payments Economy

          January saw card payment network giants Visa, Mastercard and American Express (“AMEX”) report Q1 2024, Q4 2023 and Q1 2024 earnings, respectively. Visa and Mastercard experienced growth in cross-border volumes, although at a slower rate compared to previous years. Visa reported a 9% increase in net revenues, driven by a 16% rise in cross-border volumes. Meanwhile, Mastercard saw a 13% increase in net revenues in Q4, with a significant rise in cross-border assessments and growth in switched transactions. AMEX saw net revenues rise by 11% and forecast better-than-expected profit for 2024 given spending resilience among its affluent customers despite elevated interest rates. It pointed to Millennials and Gen-Z consumers driving spending up 15% and now accounting for one third of US-billed business. It also announced plans to increase its dividend by 17% in Q1 2024 which sent the share price higher. Mastercard and Visa have continued to fortify economic moats by expanding partnerships to advance their cross-border services platforms, aiming to facilitate global payments efficiently. For example, Visa formed new partnerships to enhance remittance capabilities with Western Union, Remitly, and CIBC, whilst Mastercard developed partnerships with UBS, Alipay and Arab Bank.7 8



          Urban Machine, January 2024


          EESI, “Proposal to reduce fossil fuel subsidise”, January 2024. Available at:


          Reuters, “General Atlantic to buy UK’s Actis in latest infrastructure tie-up”, January 2024. Available at:


          Foodtank, “The Future Is Here: How California’s Farmers Are Adapting to a Changing Climate”, December 2023. Available at:


          FoodDrive, “How Fresh Del Monte uses its farms to test regenerative agriculture efforts”, November 2023. Available at:


          DarkReading, “Feds Confirm Remote Killing of Volt Typhoon’s SOHO Botnet”, February 2024. Available at:


          Bloomberg, January 2024


          FXC Intelligence, January 2024

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