When I wrote my 2019 investment outlook, we were in the middle of a “market correction” as it is now retrospectively known. Volatility was extreme and global recession fears dominated the market narrative. I didn’t know which direction the market was going (I still don’t), so I focused instead on disruptive technological trends and the sorts of companies we would be looking to invest in. I called it “inevitable intersections” and you can read what I wrote, then, here. [Note: there are no predictions about the market levels and no mention of interest rates, Donald Trump or Brexit].
This year I’ve decided to copy one of my favourite comedians, David Mitchell. Rather than writing an “outlook”, I have instead imagined myself in 2025, looking back at the important things that have happened over the last five years. It’s a “lookback”. The benefit of this is that it focuses minds on the important long-term issues and helps us break free from the status quo bias we are all anchored to.
2025 Sustainable Investment Lookback
Clean & Autonomous Transport
Here we are in 2025 and I still don’t have a car that can drive me from my home to work whilst I snooze in the passenger seat. It’s all very well Tesla* delivering an Electric Car that has 600 miles of range and can do 0-60 in 2.5 seconds for £45,000, but it’s supposed to be fully autonomous by now! Most of my neighbours and work colleagues think the same thing about their Tesla’s. On the plus side – thanks in no small part to Tesla – it looks like the worst climate change scenarios might be averted as oil demand peaked in 2022-23 and is now declining despite robust economic global growth. It’s amazing to see how the global car industry has been disrupted. There are only two genuine “old world” competitors to Tesla in the electric vehicle market (VW and Hyundai) and they are seeing all the growth. 36% of new car sales are electric today and annual demand for new combustion engine cars is less than half what it was just 7 years ago, so it doesn’t look good for most of the traditional car makers at this point.
Artificial Intelligence was certainly hyped up a few years back, but it’s interesting to see machine-learning being used in a variety of industries, particularly the healthcare sector. The US healthcare system is still over-priced, but some technology that is emerging there is inspiring (from an outcomes and cost saving perspective). Diagnostics is one such area where machine learning has enabled early identification of diseases. This has improved outcomes, reduced hospital admissions and taken cost out of the system. AI-enhanced breast cancer scans and nasal swabs for testing lung cancer are two clear examples. It’s also great to see these new peptide-based drugs hitting the market and addressing unmet needs in a variety of illnesses. In genomics, research has proliferated and compounded, increasing our understanding of diseases like Cancer and Alzheimer’s.
We now have over 100 countries in the world mandating solar panels on all new built houses. Desert states are rapidly leveraging their position in this transition by becoming renewable energy exporters. The relatively simple task of covering their unused land in solar panels and building grid infrastructure around it is so economically compelling now it would be daft not to.** Combine that with 100 new 10-12MW wind turbines that are being built globally per day and we actually have a shot at being fossil fuel free within a decade or so.
The Sustainable Consumer
Sometimes it’s difficult to point to exactly how and when a cultural change occurs but a change certainly came in the early 2020s regarding the perception of human consumption and waste. I think Sir David Attenborough – still going strong at 98 – had something to do with it. However it happened, there has been a step change in how consumers perceive their consumption in terms of both its origin and disposal. Start-ups leveraging a variety of old and new technologies emerged to resolve this friction and large corporations were forced by these disruptors to re-design the environmental and social impact of their entire supply chains. There’s a lot of work to do but glossy CSR reports produced by outsourced marketing agencies are now a thing of the past. Stakeholder monitoring and oversight of corporates has been taken to a new level. Integrated circular economies are becoming the standard of best practice. Digitally printed garments, which reduce resource use and pollution, compostable plastics, better recycling systems, a reduction in intensively farmed animal protein and less trees being cut down are some of the positive outcomes we’ve seen.
Summary: It could be worse
All said and done, we’ve made good progress this decade. Significant geopolitical uncertainty around the globe and the odd inflation scare haven’t managed to derail the important technological and societal trends that are driving us towards a more sustainable future. Sure, we could still mess it all up, but the stock market seems to be pricing in a future where companies that are having a net positive impact will be the ones that continue to grow. The world is complex with many grey areas that require diligent analysis in order to get the right answer, but the sustainable wheat is being separated from the unsustainable chaff when attributing value to a share. It’s particularly interesting to see many of the unsustainable companies that were stalwarts of the twentieth century consumer and industrial complex slipping into obscurity and financial irrelevance.
** In 2025, scientific consensus that human emissions are causing climate change is 99.99999999999999%. One person on Twitter still believes in the “alternative facts”.
*Companies mentioned are held in some of the sustainable and ethical funds at Kames Capital.
About the author
Craig Bonthron is an investment manager in the Equities team, responsible for actively co-managing high conviction global equities portfolios. He focuses on analysing disruptive and sustainable investment trends within the technology, healthcare, industrial and consumer sectors in order to identify high conviction stock specific investment ideas. He joined us in 2014 from SWIP, where he was an investment director in global equities. Prior to SWIP, he was a portfolio manager at Kleinwort Benson Investors. Craig has a 1st Class honours degree in Building Surveying and an MSc with Distinction in Business Information Technology Systems from Strathclyde Business School. He has 18 years’ industry experience.
*As at 30 November 2019.