PARTNER INSIGHT: Luciano Diana, senior investment manager at Pictet Asset Management, discusses how protecting the environment is now a priority for consumers and companies.
The environmental market is now worth $2trn globally, and consists of companies which have a low environmental impact or which develop environmental solutions. By 2020, the sector is expected to grow to $3trn.
There are also companies within the environmental market that specialise in waste management, air treatment and pollution control, parts recycling, green chemistry, waste water treatment, sustainable agriculture and food testing.
The Pictet-Global Environmental Opportunities Fund has noted that companies are increasingly factoring in environmental concerns into their product strategy. So much so, that annual applications for environmental patents more than doubled between 2000 and 20124. Dr Marc-Olivier Buffle, a senior product specialist at Pictet, says: "Companies that provide effective products and services, and which increase resource efficiency and minimise pollution, are well placed to grow strongly. By investing in these companies, investors can make a positive contribution towards a more sustainable world as well as generating attractive capital gains."
The Fund's investment team believes there has been a decline in the use of the internal combustion engine due to de-carbonisation and pollution issues, which has created investment opportunities in components, semi-conductors and infrastructure for electric and hybrid vehicles. Companies like Tesla, Delphi, Valeo, Infineon are investing in this area. Buffle says: "Five years ago, the development of the electric car was a private affair, but now electric cars have been pushed to the forefront, with brands like BMW in Germany producing their own electric cars - so it's not just Tesla monopolising electric car production. Today, the electric car is becoming part of everyday life.
"Governments are working towards new environmental standards by reforming existing engines. I think in the future it will be very difficult for car manufacturers to make diesel engines. We are seeing a commitment to changing the standards of car making."
Click here to learn about some of the long-term investment opportunities of these environmental trends.