Digitisation & AI, Renewable Energy, Energy Security and Aging Population are the highest scoring investment trends in terms of current and growing importance in the next three decades, said a survey.
The annual survey “What’s Next? Investment Trends for the Future”, was done by Investcorp, in partnership with IMD Business School.
The results suggest a slight deviance in results between senior/older and junior/younger respondents, with more senior investors viewing Digitisation & AI, Renewable Energy, and Energy Security as most important and more junior investors considering Digitisation & AI, Energy Security, and Aging Population as most important.
Megatrends
Across the population surveyed, the top 5 megatrends identified were Digitisation and AI; Renewable energy; Energy Security; Ageing Population and Electric Vehicles and Battery Storage
The survey once again identified Digitisation & AI as the dominant megatrend according to investors, which is recognised as the number 1 megatrend across all regions surveyed - Europe, Middle East, and the US. Over 8 in 10 major global institutional investors stated they are currently investing in this space or will do in the future. Investors globally strongly believe that Digitisation & AI will enable companies to provide solutions to pervasive problems and will enable a wave of innovation in the years to come
Energy security
It will come as no surprise that the data identifies Energy Security as a key theme for both Europe and the US – driven and exacerbated by the current conflict between Russia and Ukraine. The conflict has dramatically increased energy and commodity prices, aggravated the post Covid-19 supply-side shock, caused additional disruption to supply chains, and helped lead to a surge in inflation, all of which is being felt most strongly across European and US markets.
It has now become an imperative for Western markets to invest in domestic energy production to strengthen and ensure its own energy security. Survey data suggests that investors anticipate the Energy Security theme to continue well beyond the current conflict and believe it will lead to opportunities to invest in domestic energy production in Europe and beyond.
Aging population
Investors were more divided across regions on the other megatrends shaping our world. For instance, a number of the European and Asian investors (most likely driven by Japanese and Chinese investors) are concerned with the trend of an Aging Population, whilst this is less of a concern for the US and Middle Eastern regions due to their younger demographic. For both Europe and Asia, investment into the Healthcare sector is one of the more obvious investment opportunities to engage with this long-term trend.
The nuanced difference between Net Zero / Decarbonisation and Renewables
The survey highlights how the themes of Net Zero / Decarbonisation and Renewables do not have a consensus regional view. For the US and Europe, survey data suggests that Net Zero / Decarbonisation and Renewables are thought to be key investment trends that will define the next 30 years. However, the data suggests that there is a disconnect between Renewables and Net Zero / Decarbonisation in both Asia and the Middle East. Looking back on the most recent COP27 conference, it is clear that there are strong regional views and opinions when it comes to Net Zero / Decarbonisation and how quickly different regions should look to decarbonise. Contrastingly, when it comes to Renewables attitudes differ given the significant investment in large-scale renewables projects under way in both Asia and the Middle East. Varying economic considerations and energy reliance on fossil fuels across the regions explain the survey results, however, there is a clear decarbonisation opportunity in Asia and the Middle East as it’s home to countries with some of the largest carbon emission challenges.
Is the generational gap around sustainability closing?
Past narratives have focused on how the younger generation of investors are more concerned than senior investment professionals about sustainability and the future of the planet when it comes to making investment decisions. Notably, survey data suggests that this is no longer the case.
Whilst previously it may have been easy to state that there was a generational gap when it came to sustainability related issues, the reality is that a larger proportion of the investment population is actually aligned on these issues and arguably, the survey results indicate that Decarbonisation and Renewables are now even more important to the senior investment population than the more junior population with themes such as Workplace & Workforce Shifts emerging as trends that are of interest to that demographic.
Rishi Kapoor, Co-Chief Executive Officer for Investcorp said: "Flow and demand for capital, market and sector forecasts as well as the regulatory environment are all key when thinking about future investment themes. Our most recent survey provides a great insight into how global investors are assessing and weighting the different global megatrends that are shaping the world’s markets.
Hope and opportunity
“It is clear that for global investors, Digitisation & AI is a key trend that will shape the global economic landscape over the long term and our data suggests that companies that leverage leading edge technologies for solving universal or critical problems are going to be as highly investible in the decades to come as they have been in recent years. Even though the sector has had a very difficult year it remains an attractive investment domain today and investors surveyed believe it will ride out the current macro-economic storm. This provides some hope and opportunity for growth capital and investors that predominantly invest in the technology space.”
Hazem Ben-Gacem, Co-Chief Executive Officer for Investcorp, added: “The megatrends identified in our most recent survey reflect the current and future investment priorities of some of the world’s most knowledgeable and insightful global investors. The breakdown of the trends suggests that investors are acutely aware of the way that megatrends may impact their portfolios and are preparing to mitigate threats and seize opportunities that are emerging across a range of factors. In the case of Renewables and Decarbonisation, we have strong conviction in this space as we see a market with increased demand and supply issues, potential for huge innovation and a favourable regulatory backdrop.”
The survey polled global institutional investors, ranging from pension funds to family offices, on their sentiment and allocations regarding the most pressing secular trends that are expected to shape the global economy over the next three decades. The survey maps the wider demographic, resource, technological, environmental and geopolitical factors that are driving the global economy and what that means for current and future investment opportunities.-- TradeArabia News Service