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      investing in global system changes.

      the era of economics-led sustainable investing. 


      The global economy is changing. Deep system changes are transforming markets, the industrial and commercial landscape, and wider society. Led by economic fundamentals, the Sustainability Revolution is driving us towards a new economic end-state – one that is net zero, nature-positive, socially constructive and digitally enabled. 

      Throughout history, our economy has undergone many era-defining system changes, from the transition to fossil fuels to the digital revolution. Across all sectors, we believe this is happening again – at unprecedented speed and scale. 

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      five key systems.


      Investors are living in a time of upheaval: new alliances are forming; advances in AI are taking place at speed; markets have been beset by volatility; and the on-the-ground impacts of climate change are becoming more severe.

      In all this noise, it is easy to lose focus on the long-term story – the transformations taking place in the systems that underpin our economy and wider society. 

      We believe the tectonic plates are shifting. We know, because across our more-than 225-year history we’ve seen it many times before. 

       

      curing the pain points. 


      As with all fundamental system changes, today’s transformations are driven not by ideology or policy, but by economics, as forward-thinking businesses search for solutions to society’s ‘pain points’. 

      These pain points, and the systemic transformations that solve them, define their eras. Where the shift from wood-burning to coal power solved the energy crisis of the 17th century, and the transition to railways solved the capacity and efficiency limitations of horse-drawn carriages, today’s pain points focus on the climate crisis, nature loss and the consequences of changing social demographics. 

      Climate change and the
      cost of climate change

      In many parts of the world, the increasing frequency and severity of wildfires and floods has led to property insurance hikes.

      Biodiversity and
      nature loss

      Soil degradation is threatening food inflation and putting food supply chains at risk. 

      Physical changes
      to our environment

      Heatwaves and drought are reducing crop yields and forcing cities to invest in adaptation measures.

      Healthcare
      affordability

      Crumbling health systems are leading to increased health inequality and ever-longer patient waiting times.

      Challenges to
      public finances

      An escalating pensions bill threatens overwhelming government shortfalls.

      Digital
      tsunami

      A flood of digital options has created an over-abundance of choice without democratising access. A digital divide is growing. 

      In the face of these pain points, our established economic system has become unsustainable – we have reached the limits of scalability, efficiency and resource availability. In turn, the convergence of these increasingly impossible-to-ignore pain points, and an unprecedented potential for innovation, has put us on the verge of an economic revolution that will come to define the future of our species and our planet. 

      Already, forward-thinking businesses are recognising the emergence of new economic systems by innovating and adapting their business models to enable continued, sustainable growth. Led by economics, these innovators and early adapters are driving the transition to a new economic end-state. 

      From today’s linear, wasteful, unsustainable model, we are moving to a net-zero, nature-positive, socially-constructive and digitally-enabled economy.

      sustainability insights.

      • Today, we have already breached the Paris Agreement target of limiting global warming to 1.5 degrees Celsius. The climate impacts of this temperature rise are evident. Extreme weather events – including droughts, floods, hurricanes and wildfires – are becoming the norm, threatening crops, homes, livelihoods, and water supplies. 

        Despite these escalating pain points, some governments are rolling back their efforts to cut emissions, begging the question – where does this leave sustainable investing? 

        We believe that delayed action acts as an elastic band. As climate impacts rise, delays today merely mean faster, more urgent action tomorrow, marked by sudden policy reversals and dramatic market re-pricing. However, whether the journey is smooth or marked by moments of abrupt change, the end-state will be the same – a net-zero emissions economy. 

        Our energy system – as the leading cause of emissions – will be at the centre of this transition. Today, just over 20% of end-user energy comes in the form of electricity.7 We believe this will rise to almost 70% by 2050, as home heating and cooking, industrial manufacture, and huge swathes of the transport sector move to electrification, relying on zero-emissions renewables, large-scale battery storage, and digitally-connected smart grids. 

        Though energy will be at the heart of the net-zero transformation, decarbonisation will impact all sectors, as business models change and profit pools shift. Short-term policy headwinds will make no difference to the end-state destination, as escalating climate impacts and the economic advantages of clean electricity force changes on the real economy.

      • Natural ecosystems are the backbone of our economy. It is estimated that over 50% of global GDP depends directly on nature and the ecosystems services it provides8, from the fertile soils, water and pollinators that enable us to grow crops, to the essential raw materials that underpin our industries.

        Yet, today, we are losing nature at an unprecedented rate. Land-use change, deforestation, resource extraction and pollution have left as much as 40% of global land degraded9, put up to one million species at risk of extinction10, and threatened nature’s role as a vital carbon sink and climate regulator11

        As we reach the ‘end of abundance’, nature’s true value, and the cost of businesses’ nature harms, will increasingly be priced into products and services. Companies whose business models rely on nature remaining undervalued – i.e. those that pollute, extract excessively, or otherwise degrade ecosystems – will begin to find themselves priced out of the market. 

        We believe that a circular bioeconomy – a resource-efficient economic model that works in harmony with nature, rather than at its expense – will grow to replace today’s linear, wasteful, nature-degrading economy. 

        The food and agriculture sector will sit at the heart of this transition. Farmers will restore soil health and biodiversity by shifting to regenerative practices – such as introducing crop diversity, planting shade and fertiliser trees, eliminating synthetic farming chemicals, and minimising tillage. Farmland and the ecosystems they sit within will become healthier and more productive even as the land is farmed, increasing their resilience to extreme weather such as floods and droughts, and reducing yield loss over time.

        The transition to a nature-positive economic end-state will also impact manufacturing industries, which will move to circular models that rely on recycled materials, minimising waste and resource extraction. They will also turn to nature-based alternatives to many of the extracted materials we rely on today, such as plant-based plastics in place of plastic made from fossil fuels, and engineered wood in place of concrete and steel. 

        Technological advances in monitoring and measuring nature impacts, including via satellites and digitally-connected sensors, will increase supply chain transparency, helping regulators, investors and consumers understand how each business impacts the ecosystems in which it operates. We believe that regulators and, increasingly, consumers, will come to expect circularity as standard, and will favour firms whose business models have a net-positive impact on nature. 

      • Decades of globalisation and economic growth have lifted more than one billion people out of extreme poverty12. Simultaneously, living standards in developed nations have risen and global life expectancy has been transformed, rising from 46 years in 1950, to 73 years today13

        While markets have long debated such shifts, we believe today’s system changes trends run deeper, and are set to put a strain on social systems that will force governments to rethink the social contract. In turn, this will create opportunities for forward-thinking businesses who will find ways to deliver personalised goods and services accessibly and at scale. 

        As our daily lives become less affordable, with growing healthcare and housing costs, and a pensions gap that could soon threaten the public purse, we believe that a market-led, socially-constructive economic model will emerge. 

        In our health system, we will move from ‘sick-care’ – where we treat symptoms after they have arisen – to personalised, preventative medicine. Advances in AI and data analysis will support real-time, unobtrusive monitoring of health factors such as blood pressure, heart rate and blood-sugar levels, raising warning flags at the earliest possible moment. Meanwhile, the plummeting cost of computing will enable widespread genetic screening for individual health risks and the preparation of personalised lifestyle and illness prevention plans, increasing ‘health-spans’ well into our later years.

        Among myriad social changes, we anticipate greater internet connectivity will bring another one billion people on-line, democratising access to services and economic opportunity. Asset management and financial data will see strong growth as an expanding and increasingly active older generation puts more emphasis on private pensions. And across the board we will see a shift to personalisation, affordability and accessibility, as digital technologies enhance the consumer experience and expand access to those currently priced out of segments such as mobility and housing. 

      • AI, cloud computing, semi-conductors and big data will be the ‘digital spine’ of tomorrow’s economy, cutting across systems to unleash new innovations and help lower the cost of sustainable products and services. 

        In the transition to net-zero emissions, digital technologies will be essential in optimising renewable electricity production and distribution through the build-out of smart grids that control the flow of electricity and facilitate communication between consumers and producers. This will cut the cost to the end consumer, minimise transmission losses, and enable renewable electricity production to integrate more efficiently into both centralised and decentralised power grids.

        In the transition to nature-positivity, sensors and the ‘internet-of-things’ will play a key role in digitalising our farmland, cars, cities, industry, and even our bodies. For example, autonomous vehicles will become common on our roads; and digital monitoring of farmland will help farmers to minimise inputs and cut costs, while maximising yields. Across numerous sectors, AI will be an essential tool in analysing this rapidly expanding ‘big data’. 

        Technology will also underpin the transition to a socially-constructive economy. Widespread digitalisation and AI-powered data analysis will unlock a new era of personalised products and services at a lower cost, giving consumers greater access and purchasing power. As lives shift ever-more online, however, expectations of digital privacy and online safety will become new societal needs, leading to new opportunities in the cybersecurity sector. 

        The expansion of the digital sector will bring sustainability challenges of its own. Data centres, for example, require large amounts of energy and water – the same is true for semi-conductor manufacturing. We are convinced, however, that digital solutions will be a significant net-positive in driving the transition to a sustainable economy, and that all sectors will benefit as this highly innovative industry searches for solutions to its own climate- and nature-impacts.  

      our strategy.


      Through science-based analysis, and partnerships we have built with experts across numerous disciplines, we put our understanding of system change at the heart of our investment approach. Across our investment universe, we seek to understand how the deep-rooted transformations taking place in energy, industrial, consumer, health, and digital systems will impact business models and long-term profitability. Across these systems we believe opportunities are emerging where the market is mispricing the risks and opportunities created as Climate, Nature, and Social pain points force long-term system changes on today’s established economic model. 

      Having identified those businesses that we believe are set to benefit from the transition, we deploy fundamental analysis to search for price dislocations, where the commercial opportunity has been mis-priced by markets yet to wake up to the system changes happening beneath their feet. 

      While we always take a long-term approach, we are not targeting returns at an unspecified future date – but now. By over-layering systems change analysis with fundamental, bottom-up analysis, we build diversified, risk-managed, high-conviction global and thematic portfolios, founded not on hope or the changing winds of public policy, but on economic fundamentals. 


      We are living through a unique time
       

      Today’s physical and social pain points are creating huge uncertainty. They are also creating unprecedented opportunity. In a tumultuous economic environment, system change analysis provides a means to ground investment outlooks in economic reality. Put simply, the world is changing, and investors must change with it. What worked yesterday will not work today. 

      We believe that sustainable investing is essential for preserving and growing our clients’ wealth over the long term. Away from the short-term noise and the latest ‘breaking news’, the tectonic plates of global systems change are shifting. As we transition to a net-zero, nature-positive, socially-constructive and digitally-enabled economic end-state, businesses and investors must take action, or risk missing a once-in-a-century economic revolution.
       

      where we are.

      Our heritage is Swiss, yet our outlook and mind set are resolutely international. With over 25 offices globally, we are able to serve our clients all over the world.

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