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#Market Strategy — 29.01.2018

Increasing Appeal for Healthier Lifestyle and Sustainable Production Methods

Guillaume DUCHESNE & Xavier TIMMERMANS

2018 Investment Themes series: Megatrends theme #4


Enjoying a healthier lifestyle in a cleaner environment is becoming an important goal for an increasing number of people. Logically, consumer habits are changing too. We take more care of our health and our attitude towards the planet is also evolving. Fixing sustainable targets has become a top priority. This theme seeks to capture these trends, and fits perfectly with responsible investments.

Our environment has an impact on our life. Every day, we sustain negative externalities (1) which, by causing harm, can lead to a loss of well-being. A deterioration in the environment and post-industrial consumer habits may lead to undesirable effects: pollution, reduced quality of life, emergence of new diseases, food-processing scandals, etc.

Negative externalities are forcing us to change our behaviour…

Consequently, the desire to lead healthier lives is becoming a mounting concern for many people today. Conscious of the damaging effects of certain habits, growing numbers strive to adapt their lifestyle to preserve their health.  These changes will lead to new consumer trends.  Therefore, health-conscious people will take up activities deemed to be beneficial for their health (e.g. sport), modify their eating habits (e.g. organic food, healthier diet, etc.), be more selective in their consumption of personal products (e.g. natural cosmetics) and consume more health care (e.g. wellness, health innovations). In a nutshell, we will seek any solutions that favour prevention, rather than curative treatments.

… and climate change remains a decisive collective challenge

In order to have better lives, a large number of economic players are striving for a better (preserved) planet. Climate change is an economic, financial, and health issue. The reduction of greenhouse gas and carbon dioxide emissions, the development of renewable energies and the reduction of fossil fuels are now vital sustainable goals. The world energy transition is underway. The amount of installed renewable energy capacities continues to rise. Today many companies offer solutions for a cleaner environment in areas such as energy, waste management, pollution control, water treatment.

We recommend investing in a selection of shares, bonds (green bonds) and investment funds which favour healthier living.

This theme covers all regions (emerging markets and developed countries). It is fully in line with responsible investments. As a reminder, Environmental Social Governance (ESG) criteria are taken into account to generate attractive financial long-term returns, while having a positive impact on the wider society. It also meets the United Nations 17 sustainable development goals set by and for governments, the civil society and companies by 2030, with the aim of shaping future actions and developments. Here we find themes such as sustainable cities and communities (Goal 11), responsible consumption and production (Goal 12), life below water (Goal 14) and life on land (Goal 15). These goals also guide responsible investments, incorporating existing ESG criteria and developing new ones.

In conclusion, this theme will take off when people become aware of the need to live in a healthier environment and to adopt new habits to benefit their health.

MAIN RISKS

Unexpected changes to policies promoting the energy transition would have a negative impact.

A disinterest in environmental issues and/or doubts about the efficiency of certain preventive solutions would be unfavourable.

Although we consider this theme to benefit from a long-term trend, it is still sensitive to market fluctuations. A sharp deterioration in market sentiment, with investors moving away from risky assets, could penalise this investment theme. Some of our solutions are cyclical in nature and thus fairly risky.

A durable collapse in oil prices could have harmful consequences on investments linked to the environment (unfavourable arbitrage).

 


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(1) Negative externalities occur when the consumption or production of a good causes a harmful effect to a third party. Pollution is one such example.