rethink investments.

rethink investments builds on our analysis of the fundamental transformations underway in our economies and societies, and articulates the thematic investment opportunities that flow from them.

Companies we have identified within this framework will all benefit from their exposure via incremental future revenue or earnings growth, in our view. However, material exposure to these themes alone does not mean that they will be good investment opportunities. The fundamental qualities of a company, including its business model, pricing power, innovation, balance sheet, cash flow generation, management team, and sustainability metrics form the bedrock of our choice.

We believe tactical portfolio positioning to exploit shifting market trends should be complemented by exposures to these longer-term, structural drivers of economic outperformance. This allows us to optimise asset allocations as the world’s economic model evolves.

Life expectancies have risen radically in the last 70 years, promising a new era of healthy, older living. Healthcare, financial and consumer companies are at the heart of the challenges and opportunities that increased longevity brings. Healthy ageing is creating tailwinds for consumption, leisure, and tourism services. Connected medical devices support a shift towards longer independent living. Simultaneously, promising age-related disease treatments may unlock a rising share of healthcare spending. China has put in place ambitious government policies to facilitate access of its population to innovative treatments, offering new opportunities. Meanwhile, financial services will see more demand for savings solutions, benefiting insurers, wealth and asset managers.

Alongside rising longevity, a new generation is coming of age and changing global spending power. This ‘new gen’ is increasingly middle-class, digitally native, experience-led, convenience-oriented, lifestyle-and-climate-sensitive. They are overwhelmingly based in emerging markets. Selected technology, telecoms, sportswear, luxury, and beauty companies stand to benefit. New healthcare challenges are also creating new markets, including for wearable devices that measure and analyse personal data. The rethink new gen investment theme captures opportunities from these evolving consumer habits and influences.

The widespread roll-out of AI to the services sector is creating a new technological revolution. This is equivalent to the industrialisation of the last two centuries and is driving structural demand for semiconductors and data centres. AI’s applications are improving research and development (R&D) and product design, supporting factory and home automation, making health services cheaper and more precise, while improving customer experiences. From the technology sector to a range of industries from finance to retail, companies in the AI value chain are set to benefit.

Limiting climate change requires the transition to a net-zero economy. Shifts in energy, materials, and agriculture are key, and firms leading such changes to energy generation and clean transportation should benefit. This theme also explores developments in raw material demand, as well as companies employing circular production processes, recycled and alternative construction materials. More efficient food chains, including dietary changes and technological advances in agriculture, will emerge. We also highlight the ‘enabling services’ behind key system changes, including more efficient production processes and shared mobility. 
 

5. rethink nature.

Climate change, biodiversity loss, land degradation and more frequent pandemics are all symptomatic of an economic system at odds with the natural environment. Natural assets and services tend to be deeply undervalued or ignored. The rethink nature theme crystallises how listed companies leverage nature’s regenerative power, or support its preservation through pollution control, waste management, and sustainable resource management. The theme offers a way to unlock value from the net-zero transition to a nature-positive economy. We highlight firms active in regenerative forestry, organic fertilisers, biofuels, sustainable packaging, and innovative recycling. We expect this theme’s opportunities to grow over time as more private companies seek access to public markets and a broader investor base.

The transition to a nature-positive, technology-embedded economy demands an overhaul of the world’s infrastructure. While governments and institutions can catalyse projects, the limits of public finances leave an important role for the private sector and private investors in transforming power, transport, water, and communication infrastructures worldwide. In listed equities, we seek attractive growth opportunities in industrial, utilities and energy companies which are participating directly in the infrastructure boom. 

¹ Sources: World Data Lab, McKinsey, Cancer Research UK
² Sources: ABB Survey 2022, US Environmental Protection Agency, International Energy Agency