Future world: a thematic opportunity
Capturing growth and value creation from three interconnected megatrends.
Key takeaways
- Economies worldwide are being shaped by a series of interconnected, powerful and long-term megatrends.
- An investment approach that recognises and integrates the complex interplay of overlapping themes can unlock valuable investment opportunities.
- A hybrid, quality-focused approach, with an optional mix of qualitative and quantitative techniques, is required to isolate these themes and identify the winners that are best placed to benefit over the long term.
Why thematic investing
Societies and economies are increasingly being shaped by a range of megatrends from transformative technologies to the climate crisis and demographic change. By tapping into these major themes, investors aim to capture their significant.
Thematic strategies focus on investing in assets that should benefit from long-term megatrends. This approach adds a new layer to asset allocation, transcending traditional classifications of asset classes, sectors and regions.
Energy evolution
The evolution of climate and nature solutions and the tightening regulatory landscape has accelerated the demand for green alternatives, and sustainable products and services. At the same time, the electrification of heating and transport, the onshoring of manufacturing, and the data glut are driving a step change in clean energy demand.
Improving energy efficiency will create significant opportunities across transportation (electric vehicles (EV) and alternative fuels), manufacturing and raw materials extraction (industrial machinery and processes), real estate (heating, ventilation, air conditioning, doors and glazing) and data centres (energy-efficient chips). Efficiency alone cannot address the rise in power demand from the widespread electrification of energy systems, though.
Figure 2 illustrates the forecasted growth of EV sales as a percentage of total car sales over the next 25 years. Currently, EV sales constitute approximately 20% of global car sales. Projections indicate a significant increase, with EV sales expected to reach 85% of total car sales globally by 2050. This exponential growth places it at the beginning of the S’-curve, a phase characterised by rapid adoption and market expansion. This trend represents a monumental shift in the automotive industry compared with just a few years ago. Companies involved in the EV value chain, including manufacturers, suppliers of lithium and other essential raw materials, and technology providers, are set to benefit substantially from this transition.
Figure 2. EV forecasts as a percentage of total car sales
Health, wealth and demographics
Breakthroughs in healthcare are contributing to longer and higher-quality human lives, and changing demographics. At the same time, rising income levels in emerging economies and generational shifts in behaviour are unlocking new markets and opportunities.
Demographic change influences economies and societies through a myriad of channels. Population growth in young countries can drive demand for new infrastructure and create an expanding environmental footprint. In contrast, shifting population composition can put strain on the sustainability of social welfare models and public debt when countries reach old age’.
Figure 3 shows that the percentage of people aged 65 and over is the primary age group that will increase over the next 75 years, versus all the other age groups.
Figure 3. Population by age group