We believe investors will need to adjust expectations downwards across almost all asset classes in the future, with real returns of 4-5% not unimaginable. Real yields on government debt may struggle to exceed 1-2% at the same time. While investors can receive a premium for corporate instruments, these are likely to experience rising default levels.
It is clear we need to change the way we think about investing. While it is imperative we adopt a long-term mind-set, we must also incorporate notions of responsibility and stewardship into our actions. If we chase an outcome at the expense of the society we inhabit, then these returns serve no real purpose.
Thankfully, the assumption investors would have to sacrifice returns for pursuing positive social and environmental change has long been dismissed. The good news for investors today is there are many long-term sustainable thematic opportunities to explore – in areas such water, urbanisation and cybersecurity.