On May 8, 2013, large solar panels can be seen in a solar power plant in Hami, China.
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From green energy to equal access to education and technology, investors are finding ways to make money from these “unstoppable trends,” says Citi.
Alternative and green energy are “very productive right now” when it comes to global trends, said Ken Peng, head of investment strategy for Asia-Pacific at Citi Private Bank, during a virtual media briefing on Wednesday.
“Governments from around the world, from China to Europe to the US, are focusing on sustainable development and putting money where their mouth is,” he said.
But the sector “got a little too hot” in 2020 as investors entered with borrowed money, he said. In the months since January, investors got out of positions and that market fell 40% through May.
Now he said, “I think this is a very interesting opportunity to get on the bus for this trend that will likely be with us for a good part of the next decade.”
David Bailin, chief investment officer at Citi Global Wealth, also said that over the next five to ten years, investors – especially younger ones – will have a “huge focus” on sustainable and responsible investing, rather than just focusing on profits.
They will look at how companies treat the environment, employees and even politics will be part of their investment decision, he told CNBC on Tuesday.
He said the most important are the “unstoppable trends” such as climate change and social justice, including equal access to education and technology.
“These are all areas that I think will see unusual growth over the next five to ten years,” said Bailin, who is also the company’s global investment director. “So these two things will come together and I think it will give investors an opportunity to make money by doing good.”
Such investments, known as environmental, social and governance (ESG) investments, are on the rise. Last month, BlackRock told CNBC that ESG investments could reach $ 1 trillion by 2030.
Cybersecurity as part of the ESG rationale
The ability of companies to deal with cybersecurity risk is also part of the overall ESG discussion, said Bailin.
“In my opinion, this unstoppable trend of the need for stronger defense (which leads to higher spending in this area) is good for the people who make that type of security and you can invest in it,” he said.
Last month, the Colonial Pipeline was hit by a cyberattack that forced the company to shut down an approximately 8,500-mile pipeline in the United States that crippled gas supply systems in the southeastern states.
At the same time, Bailin warned that such investments can have “significant risk”.
“Remember that cybersecurity also has a very important military component,” he said.
“It is used not only as a ransom by corporations, but also by the military to destroy the infrastructure of their opponents,” he added. “So for us this is an area of continued concern, increased concern – but also an area that can actually be invested.”