Q&A - has sustainability been Trumped?


Mike Fox, Head of Sustainable Investments

6 June 2017

RLAM’s approach to sustainable investing is distinctive and demonstrates strong, risk-adjusted returns. In our latest webcast, Mike Fox discusses how President Trump’s environmentally unfriendly policies might affect sustainable investment strategies.
In aggregate, what would Trump’s impact be on relative performance?
We had a good first quarter, which surprised us a bit! The ‘Trump trade’ that came in after the election was driven by inflation and lower quality assets, has faded much faster than anyone expected. There’s been a re-commitment from investors to longer term growth and better quality, which suits our investment style. Overall, we haven’t seen a great impact at all. Our base case is that this will continue.
How about the cost-effectiveness of alternative energy? Do electric cars have advantages down the track?
Yes, these vehicles are developing quicker than people believe. We do think that, if you look at where environmental damage has been done, the automobile industry has largely escaped legislation to mitigate it; we believe this will change and electric vehicles will be key beneficiaries. Nevertheless, the vast majority of cars are still petrol vehicles – electric vehicles will not be making their big impact straight away, but more like over the next 5-10 years.
What are some investible themes in Artificial Intelligence (AI)?
Areas that AI does get into are interesting. AI is the next big revolution to affect everyone in every industry – the last one was the internet. AI is being driven by the explosion of data and computing power. This will spur progress in, for example, healthcare, where better data analysis can result in better treatment and diagnosis. Another example is where Google has used AI to manage its energy efficiency, improving its energy consumption globally. These are just a couple of examples of the widespread impact of AI.
How do you avoid being drawn into high valuations when it comes to investing in innovative companies?
I started my career in the tech boom in 1999 – I saw how ridiculous valuations can become. But we’re not seeing anything like that now. We thing, for example, Google is still relatively undervalued in the market, and Microsoft and Amazon, too. AI, cloud computing and electric vehicles – these are all the beginnings of trends, and will provide attractive opportunities for years to come.
Has the increase in client interest been from the sustainable element, from performance, or from both?
This is one of the most fascinating things. We get both types of interest, sustainable investors and return-seekers. When I started in sustainable investing in 2003, 99.9% of people were drawn by the sustainability element. This has changed a lot. We’re seeing more and more conventional investors looking at what we do, and the ‘hook’ is the persistency of our returns. Can we prove to them that a sustainable approach to investing can genuinely add value? We think we can. 
To what extent will the sustainable universe benefit from fiscal stimulus?
Stimulus is useful at certain points in the economic cycle. Where we notice this particularly in the investment world is when we come out of recessions, for example in 2008/2009, when stimulus can be very helpful. From our perspective, we look at long-term structural growth drivers, which tend to find their own way. Stimulus is therefore less relevant because of our style of investment; we don’t depend on central banks for our investment returns – it’s very much down to what the individual companies achieve.

RLAM’s approach to sustainable investing is distinctive and demonstrates strong, risk-adjusted returns. In our latest webcast, Mike Fox discusses how President Trump’s environmentally unfriendly policies might affect sustainable investment strategies.

In aggregate, what would Trump’s impact be on relative performance?

We had a good first quarter, which surprised us a bit! The ‘Trump trade’ that came in after the election was driven by inflation and lower quality assets, has faded much faster than anyone expected. There’s been a re-commitment from investors to longer term growth and better quality, which suits our investment style. Overall, we haven’t seen a great impact at all. Our base case is that this will continue.

How about the cost-effectiveness of alternative energy? Do electric cars have advantages down the track?

Yes, these vehicles are developing quicker than people believe. We do think that, if you look at where environmental damage has been done, the automobile industry has largely escaped legislation to mitigate it; we believe this will change and electric vehicles will be key beneficiaries. Nevertheless, the vast majority of cars are still petrol vehicles – electric vehicles will not be making their big impact straight away, but more like over the next 5-10 years.

What are some investible themes in Artificial Intelligence (AI)?

Areas that AI does get into are interesting. AI is the next big revolution to affect everyone in every industry – the last one was the internet. AI is being driven by the explosion of data and computing power. This will spur progress in, for example, healthcare, where better data analysis can result in better treatment and diagnosis. Another example is where Google has used AI to manage its energy efficiency, improving its energy consumption globally. These are just a couple of examples of the widespread impact of AI.

How do you avoid being drawn into high valuations when it comes to investing in innovative companies?

I started my career in the tech boom in 1999 – I saw how ridiculous valuations can become. But we’re not seeing anything like that now. We thing, for example, Google is still relatively undervalued in the market, and Microsoft and Amazon, too. AI, cloud computing and electric vehicles – these are all the beginnings of trends, and will provide attractive opportunities for years to come.

Has the increase in client interest been from the sustainable element, from performance, or from both?

This is one of the most fascinating things. We get both types of interest, sustainable investors and return-seekers. When I started in sustainable investing in 2003, 99.9% of people were drawn by the sustainability element. This has changed a lot. We’re seeing more and more conventional investors looking at what we do, and the ‘hook’ is the persistency of our returns. Can we prove to them that a sustainable approach to investing can genuinely add value? We think we can. 

To what extent will the sustainable universe benefit from fiscal stimulus?

Stimulus is useful at certain points in the economic cycle. Where we notice this particularly in the investment world is when we come out of recessions, for example in 2008/2009, when stimulus can be very helpful. From our perspective, we look at long-term structural growth drivers, which tend to find their own way. Stimulus is therefore less relevant because of our style of investment; we don’t depend on central banks for our investment returns – it’s very much down to what the individual companies achieve.

To listen to the full webinar please click here

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.