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Aegon AM’s McPartlin: Four sustainable investment themes for 2022

sustainable investment for growth
Sustainable investment

Sustainable investing will continue apace in 2022, with four key themes driving change says Malcolm McPartlin, co-manager of the Aegon Sustainable Equity and Global Sustainable Equity Funds.

“We invest in companies that are disrupting and transforming industries,” says McPartlin, “companies that have the potential to be significantly bigger on a long-term view, regardless of the wider economy.”

For McPartlin, the best way to generate value is to stick to long term sustainable growth investing focussed on the huge sustainable revolution underway in society. “The companies and themes we invest in are addressing long term sustainable issues and while we don’t expect them to change too much from year to year, there are a number of areas we are closely monitoring in 2022.”

Below, McPartlin highlights the four themes which excite the team in 2022:

1) Energy transition

“We believe the transition to renewable energy will continue strongly in 2022 and the current energy crisis will accelerate this trend.  We expect continued major investment announcements from governments and companies worldwide on energy transition plans.

“2022 will be the year green hydrogen cements its position as a key component of the energy transition and we are positioned to benefit from this trend with holdings including ITM Power. Within the portfolio, we also have investments in solar and power transmission.”

2) Digital transformation

“Last year we called out digitisation as an exciting theme emerging as a response to the Covid–19 pandemic. This featured strongly in 2021, benefitting several of our holdings including digitally focused IT services business Endava, which offers its clients’ assistance in new business ideas, products and strategy to support their digital transformation.

“Moving forward, we expect the digital transformation trend to continue in 2022 and for years to come.  The migration to cloud computing for example, is good for both businesses, providing them with flexibility and resilience, and for the environment in reducing the energy intensity of computing and reducing e-waste. One of our key holdings in this space is Workiva, a leading US cloud reporting platform that digitally transforms critical regulatory, compliance and management information reporting for enterprise customers.”

3) Automation and robotics 

“One area we believe could see pick-up in demand in 2022 is automation and robotics. On one hand companies are facing ongoing labour force disruption and rising wage bills and on the other, the cost of automation technology continues to fall.

“The incentive for companies to invest in automation has increased markedly over the last year. We believe that leads to an acceleration in the adoption of automation as companies try to mitigate operational disruption and cost pressures.  We have several investments in this space, for example provider of industrial automation and inspection equipment Keyence and automatic test equipment designer and manufacturers Teradyne and Chroma Ate.”

4) Healthcare 

“We are seeing huge potential for transformational change in the healthcare sector with exciting innovations and rapid progress across many aspects of the industry.

“One area that particularly excites us is genomics. Progress made over the last 10 years including the exponential fall in the cost of gene sequencing is opening up so many possibilities for the sector: A patient’s DNA can now be sequenced for a few hundred dollars, which has profound implications from detection to treatment of diseases. This sequencing has transformational potential, indeed it was genomic technology that enabled such rapid development of the MNRA covid vaccines that have been so crucial in fighting the Covid-19 pandemic.

“We are investing in genomics in several ways, from companies providing the tools such as pioneers of DNA and RNA sequencing Oxford Nanopore and Illumina, to the companies developing transformational products with the technology such as cancer diagnostics company Veracyte.

“Elsewhere in healthcare – and as discussed earlier – we like the general theme of digitisation, which in many respects is years, even decades, behind other industries. Technological improvement and shifting consumer behaviours will drive this change.  Again, we believe Covid-19 is acting as an accelerant for digitisation of healthcare and in this sector, we have investments in companies such as online pharmaceutical company Zur Rose and healthcare digital services provider M3 that are helping to modernise specific elements of the healthcare system.”

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