Matt Christ and Nazmeera Moola discuss the emerging market transition and the opportunities they’re seeing in the emerging market universe.
This research paper makes the case for transition investing and explains how to identify a true ‘transition asset’.
The path to net-zero is not simple or linear. It’s complex and probably messy. But in disorder there is opportunity.
Evidence suggests the transition to a low-carbon economy will be disorderly. By allocating to ‘transition assets’, investors can mitigate some of the disorder, while potentially generating positive outcomes for their portfolios.
We surveyed 300 asset owners and advisors around the world to find out where they are in their transition investing journey.
General risks. Past performance is not a reliable indicator of future results, losses may be made.
Specific risks. Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Derivatives: The use of derivatives is not intended to increase the overall level of risk. However, the use of derivatives may still lead to large changes in value and includes the potential for large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss. Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company. Geographic/Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that, in certain market conditions, the value of the portfolio may decrease whilst more broadly-invested portfolios might grow. Reference currency hedging: Aims to protect investors from a decline in the value of the reference currency only (the currency in which accounts are reported) and will not protect against a decline in the values of the currencies of the underlying investments, where these are different from the reference currency. Difference between the currencies of the underlying investments and the reference currency may cause loss when the reference currency rises against the share class currency. Such hedging will not be perfect. Success is not assured.