The Point

It’s green, but is it a good investment? Here’s how to know

There are three things to consider when judging whether a green investment is also a good investment. 

“Start by make sure what you’re considering is actually green”, says Maxime Le Floch, an analyst with Regnan’s Global Equity Impact Solutions team. 

“These are very complex multi-dimensional issues and it’s not just about climate change. It’s also about ocean health, foods, wastewater and many other issues,” he says. 

Second, focus on solutions with a strong relative advantage over competitors. 

“It’s important to not just look at the environmental benefits of a technology but also how it performs relative to other technologies,” Maxime says. 

Finally, focus on long-term opportunities. 

“Investors should focus on areas where there are structural growth opportunities – offshore wind, wood-based fibres, water treatment solutions,” he says. 

How Regnan investors are helping fight obesity

Some 650 million adults are obese (1.9 billion are classed as overweight) and about 4 million die of obesity each year.

But anti-obesity medication is almost non-existent. “It’s a new category,” says Maxime Le Floch, an analyst with Regnan’s impact investment team.

Now investors in Regnan’s Global Equity Impact Solutions fund can say they are helping develop a solution.

Regnan is an investor in Danish diabetes pioneer Novo Nordisk, which is “the poster child for finding a really strong solution that’s miles ahead of competitors in a fast-growing market,” says Maxime.

Novo Nordisk launched its new Wegovy injectable anti-obesity drug in the US last June and expects to launch in Europe later this year.

“Novo Nordisk is investing in clinical trials to prove further the benefits of its treatment, says Maxime.

“It could end up in a new market where there aren’t many solutions and there is a massive opportunity.”

Pre-election rate rise on the cards

Australia this week sped past the RBA’s 2-to-3% inflation target and caught up with other global economies.

What’s next?

Beyond the headlines of yesterday’s 5.1% CPI result, the contribution of new dwelling purchase price and rents are useful bellwethers, says Anna Hong from Pendal’s Income and Fixed Interest team.

“New dwelling prices came in at 5.7% for this quarter — the highest since the turn of the century. Builders are finding it difficult to quote given the cost pressures they’re facing.”

Meanwhile rents turned the corner, contributing 0.6% this quarter. “Rent growth is accelerating across capital cities and there is more to come.”

This means increased pressure on the RBA to hike rates during the election campaign, says Anna.

“Markets have already priced in aggressive rate hikes in 2022 and a cash rate forecast above 3% by end of 2023. This may come as a shock to mortgage holders.

“The RBA is increasingly looking like it must join other central banks in dampening demand to rein in inflation rather than waiting for supply to fix itself.”

Global equities 2025 outlook: From Trump and Japan to weight loss drugs and AI

A new Trump Administration, mass restructuring of Japanese corporates, AI adoption and weight loss drugs are some of the trends that will drive global equities in 2025, says Pendal global equities PM Chris Lees.

Chris goes into detail in a new webinar which also features Pendal emerging markets fund manager Ada Chan.

“There are a lot of really exciting mid-cap stocks around the world, in many geographies, in many sectors, where earnings have come through the last few years – but share prices haven’t done much because global markets have been obsessed with the Magnificent Seven [tech stocks],” says Chris.

“Partly the better performance from mid-caps is a result of the Trump election, because the new Administration will be very business friendly.

“We are also seeing a better performance from the financials and cyclicals. I think that is sustainable.”

In the webinar (which is eligible for CPD points), Chris also discusses opportunities in Japan as well as the US and Europe, where second-generation weight loss drugs are in development.

Ten themes global equities investors should be thinking about in 2024

There are ten major themes driving global equities investing right now, according to Pendal portfolio manager Chris Lees.

In his latest quarterly video, Chris briefly outlines each theme and how he and Pendal Global Select Fund co-manager Nudgem Richyal aim to take advantage.

Chris and Nudgem remain enthusiastic about biotech, buying a mid-cap stock with positive new drug results in the anti-obesity space.

But he also warns investors to be aware of anti-obesity losers among snacking stocks and consumer staples.

“It’s also becoming bad news for the healthcare sector. So we would expect the healthcare sector to deteriorate to red lights as well.”

Chris sees a tech-driven bull market continuing to broaden away from mega caps into midcaps.

“The technology sector’s got positive fundamentals and positive trend, but it’s now expensive and we would expect other cyclical sectors above it to start improving.”