What Trends Could Shape the Businesses of Tomorrow?
A look at four long-term trends with the potential to reshape the future direction of businesses worldwide
Identifying emerging societal and environmental trends worldwide opens investors up to significant opportunity, according to Anne-Laurence Roucher, Deputy CEO and Head of Development and Operations at Mirova, a responsible investing firm. Four major global transitions Mirova’s research team is focused on to pinpoint sustainable investment ideas are demographics, environment, technology, and governance.
Forthcoming global demographics that have the potential to influence a wide variety of businesses and markets include an increasingly older population in developed economies, the growing number of middle class consumers in emerging economies, and a general shift to healthier products and consumption habits across the world. Mirova estimates that the percentage of people worldwide aged 65 or older will grow from 8.5% to over 15% by 2050. The firm also anticipates worldwide urbanization trends to strengthen. While half the world’s population lives in cities today, Mirova expects two-thirds of us will live in cities by 2050.
Dynamic Environmental Change
In many ways, renewable energy has become synonymous with sustainable investing. However, when it comes to environmental plays, Mirova looks well beyond power generation. “We obviously see a long-term trend towards renewable energy, such as solar or onshore wind,” says Roucher, but other potential value opportunities can exist in companies focused on energy efficiency. “In the energy efficiency space, there are a number of plays to consider – the building sector, with LED lighting, for instance, or clean mobility, also known as sustainable transportation.” Roucher believes resource management – including efforts to improve waste and water management systems – also represents an area of potential opportunity for investors.
Technological disruptions are likely to continue apace in the years ahead, significantly altering traditional relationships between and among businesses and consumers. According to Roucher, these include the expansion of e-payment systems in both developed and developing economies, cloud storage and big data, and artificial intelligence and biotechnology in the health and agriculture sectors. She suggests that technological disruptions of day-to-day living will continue to change the way the world consumes goods and information.
Governance Issues Taking Precedence
As governments worldwide continue to face substantial financial challenges and contend with tumultuous political circumstances, the role that businesses play in social development may change markedly. In fact, Roucher anticipates significant changes in the role played by corporate governance in the worldwide effort to establish more sustainable business, health, and consumer practices. “We see a strong shift from public to private in terms of power – and in this, finance has a great role to play.” Roucher believes the financial sector, including investors and financial professionals, will play a major role in funding the creation and advancement of a more sustainable world in the coming years. Mirova estimates that there are more than 2000 businesses in the US today focused on these issues.
An Inspired Approach
Each of the four megatrends identified by Mirova have the potential to foster an array of long-term growth opportunities for investors interested in a more sustainable future. “The trends generate a lot of investment ideas that can be reflected in our equity and fixed income strategies,” says Roucher. She adds that Mirova’s sustainable investment philosophy is likely to resonate with investors looking to better sync their asset allocation with their belief in social and environmental development.