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Thematic investing myth 1: What is the trade-off?


BNP Paribas Asset Management


We believe that the argument that there is a trade-off between environmental thematic investing and long-term performance does not stand up. The concept of taking high levels of risk for higher returns is often associated with thematic funds that focus on technology stocks or disruptive trends, but it’s important to remember that many environmental companies are also disrupters. To both create alpha and mitigate risk in this space, the technological know-how and acumen of the investment team are crucial.

Many innovative technologies in the environmental space can offer great investment opportunities. The rise of wind and solar power is a good example of upcoming industries that have been successful and transformative, and have seen. These companies are becoming established energy providers.

We believe many energy transition-related areas have yet to come close to fulfilling their potential.

Given the need to transform multiple areas of our existence, the question should not be whether environmental funds will deliver competitive long-term returns, but whether the opportunity cost of not being present in this area could be too high.

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Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. The views expressed in this podcast do not in any way constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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