Climate Assets monthly update: Are we there yet? Almost!

We are ending a very challenging year with more promising news. Inflation has come down in the UK, Europe, and the US. Thus, central banks have changed their interest rate narrative, with markets pointing to interest rates falling next year. Hooray, I say! However, while central banks are close they are not quite there yet, as there is a fine line between rates declining and bond yields and equities rallying too fast, thus taking us back to where we started. Nevertheless, interest rates falling, or the expectation of interest rate declines, is what we needed for investment focusing on sustainability to start performing again, as we explained in our November article, Sustainable Investment: increasing optimism after a challenging period. 

The final version of the FCA's Sustainable Disclosure Requirements has been released.  It now introduces a set of four 'sustainable categories' for funds to demonstrate alignment with. Personally, I am very excited about the arrival of the final rules, as it will help clients and advisers alike distinguish between funds with a credible approach to sustainable investment and those without. Whilst a significant amount of work is underway to align our Climate Assets Funds, I remain confident that our approach and philosophy fits very well with the ‘sustainable focus’ category.    

Looking ahead, the scale of the challenge in tackling climate change continues to underpin investment opportunities across our investment themes. In particular, the electrification of transport remains in full swing, and economies of scale continue to develop. After a year of significant re-rating across our investable universe, we see attractive valuations across power electronics and automation to improve energy conversion, efficiency, and car performance as well as EV charging infrastructure.

Finally, the festive season is here, and we wish you 'Feliz Navidad, Próspero Año y Felicidad' – merry Christmas, and a happy and prosperous new year – with your loved ones.