Thematic environmental strategies face countervailing forces in the near term. Support may come from the ‘green shoots’ of the recent growth stock recovery, offset by the downdraft of recessionary risk. Investors with a longer-term view should stay focused on the tailwinds and enduring drivers of demand including regulatory and legislative support.
On this Talking heads podcast, Edward Lees, co-head of the environmental strategies group, tells chief market strategist Daniel Morris that 2023 should be the year of implementation for green initiatives such as the US Inflation Reduction Act, predicting some of the capital flows could last 10 years.
On the latest earnings news, he says any weakness represents ‘delayed, not lost, revenues’. He notes the recent COP27 meeting brought ‘not nearly enough progress’, but highlighted some encouraging developments.
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Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.