Investors turn to renewables for returns

Investment manager Schroders has noted the growing trend of investors focussing on investments in the renewable energy transition, smart manufacturing, and food production. 

These themes have been accelerated due to Russia’s invasion of Ukraine and are becoming durable trends that investors are looking to capitalise on. 

While investments in these sectors are good for the planet and society, they are also good investments in terms of returns, said Schroders. 

Higher fossil fuel prices and limited availability have made the case for investment in renewables even stronger with outsized returns on offer. 

There is also a significant gap between how much investment is required for the renewable transition and how much is currently being invested. 

This presents a good opportunity for investors to jump into the growing industry as investment from others will follow. 

Investments need to be made across the entire value chain, from generation, transmission, and storage to energy efficiency and clean mobility. 

Schroders believes that we are only at the beginning of a multi-decade cycle driven by economic incentives for renewables, more conscious consumers, and increased government regulation. 

Sustainable food production and water supply have also accelerated since the end of Covid, with Schroders seeing opportunities in food and fertiliser production in particular. 

The war in Ukraine has shown these supply chains to be highly vulnerable, and disruptions to them are likely to have long-lasting effects on global food prices. 

Ultimately, Schroders sees great opportunities in the need for the global economy to sustain a population of roughly 10 billion people by 2050 with 66% fewer resources. 

The asset manager sees smart manufacturing as a durable investment trend that investors are buying into and will continue to do so. 

In particular, Schroders views the development of alternative proteins as a long-term investment opportunity where balance sheets are strong enough to weather short-term market volatility. 

In the past year, increased attention has been placed on the advantages of a circular economy in terms of managing the resource scarcity we have seen of late. 

A circular economy delivers what consumers need without negative externalities, such as pollution, by designing products and services with efficiency, reusability and recyclability in mind. 

Schroders said this is a global, durable, and accelerating theme that is essential to protecting the planet and living standards long into the future. 

Investors can back – and benefit – from directing capital towards its success, with the asset manager believing that superior returns can be generated by investing in the circular economy.


Top JSE indices