Lars Kalbreier
Very much so. First of all, I would very much agree with Carlos that investors are moving away from a pure benchmark approach, or benchmark plus 200 basis points. Tracking is not really the trend in asset management. I think we are going more to the very much targeted, thematic funds where you are identifying a couple of investment themes and then you really focus your efforts in that specific area. The benchmark approach is probably best left to passive funds.
I think climate change offers, certainly, a wealth of different themes which not only interest investors or private clients just because they are fashionable, but they can also present very, very good investment opportunities. One specific example of that is resource efficiency. In fact, what I believe very strongly is that the low hanging fruit of combating climate change has nothing to do with the theoretical view of trying to combat climate change, but it is about having to deal with the consequences of climate change on different resources. The way you deal with that, or you will deal with that, is only through price. It is very nice to have lots of good intentions, but what is really going to be securing investment in that space is probably less government involvement, and more the price. These are the prices of different resources. This can be the price of carbon emissions. Only then the invisible hand of the market will start to fully work. So it is very good that the Governments are making steps in that direction, but at the end of the day, it will be about the price.
Now, if you look at specific subcomponents, like resource efficiency, this is very much the low hanging fruit of the whole debate. We have been looking at solar and wind and so on, but perhaps one of the reasons why solar and wind were not good investments is because there is a much more apparent and lower hanging fruit. If you look at the way we use energy and even resources such as water, we are just wasting it. We are using it in the same fashion that we used to use it, let us say, 50 years ago or 20 years ago. If you look at London, I see that 50 per cent of the water just trickles through the pipes, because the pipes are more than 100 years old.
We just need to revisit the ways we use resources including CO2 emissions, by using them differently and using them in a smarter way. I believe it is very easy for us to reduce our energy consumption by about 30 per cent, just by using them much more efficiently. That is really much easier than revolutionising the whole energy source system.
Now, the second angle to that would probably be the proper alternative energy sources, but it is going to take a really long time before we can start to use them. Some innovations are coming from the scientific backgrounds and we will start to see more and more of them in our daily life. The one I am thinking about the most is nanotechnology in solar cells, which is solar coating. You already have companies which have developed transparent solar panels in labs which you can apply to windows. Every window panel that does not have a transparent solar panel would potentially be just a waste of space and a waste of potential energy source. Right now it is still very expensive, but prices will be coming down and in the next ten to 20 years it is probably going to be standard. But that is way off, and it is probably too far off in terms of investment horizons. So, the low hanging fruit is really going to be about how we are using energy in a much smarter way.
Elisa Trovato
What has been the impact of the financial crisis on investors’, with regards to the ESG-type products?
Lars Kalbreier
One thing that I think is very important is that the financial crisis has triggered a move to back to basics and back to transparency. The thematic approach is tangible, it is something that clients can understand.
Thematic products are more transparent because you know how much you generate, how big the margins they make are and what kind of contracts they have for the next two or three years. And I believe that is partly also what has generated considerable interest in the thematic approach and thematic funds. The other thing is that if you look at what has been happening over the last three years or so, you notice that in fact, clients have become much more participative in the investment decisions than they used to in the past. Probably in the past, they relied on the relationship manager to make the investment for them, and they did not really participate that much. They are now also questioning the investment decision. So this more participative approach has brought clients and relationship managers to speak about themes, not only regarding diversification; because as we have noticed, diversification did not really work.
