An expanding population and the rising demand for food, energy and materials continue to strain the finite resources of the planet. The need for solutions that improve energy efficiency, lower food waste and provide alternatives to scarce resources has never been greater. Underlying these trends is the persistent increase in global emissions which has led to intensifying debates around climate change and how we can resolve it.
Learn more about the megatrends shaping our future of economies, business and society.
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The earth in the hot seat
In 2018, global emissions continued their march higher growing 1.7% yoy (year on year).1 In turn, the US National Climate Assessment report noted that sea levels are now rising twice as fast as 25 years ago, while re-insurance company Swiss Re estimated recently that natural catastrophes and extreme weather events caused $146 billion (all amounts given in USD) in damages in 2018. The social and economic consequences of climate change are substantial. How can this be slowed?
Investing in energy efficiency and renewable energy
Investing in energy efficiency and renewable energy is an important step. The good news is that clean energy today is cheaper than it has ever been. The average price of a solar module has fallen 88% since 2010, while the cost of wind turbines has declined by over 40%.2 In some countries, clean energy sources are comparable to natural gas and coal power in terms of unit costs and rely less on government subsidies each year.
Source: 1. Global Energy & CO2 Status Report, The International Energy Agency, Mar 2019. 2. Bloomberg, Dec 2018.
Getting more out of less
Similar solutions are needed in agriculture as the need for nutrition rises with per capita GDP in large emerging markets. This greater demand will have to be satisfied with fewer resources too; worldwide, land area dedicated to agriculture has not increased in the last 20 years, while agriculture's share of employment has dipped to about 25% from 42% just 30 years ago. To produce more with less, productivity improvements need to be relentless.
Source: Eurostat - Jul 2019, US Census Bureau Feb 2019, Japan National Statistics - Aug 2019.
What are the investment opportunities?
We strive to identify innovators who provide solutions to climate change including producers of solar panels, wind turbines and electric vehicle technologies. We also seek substitutes to scarce materials, especially those used in new, essential technologies such as batteries and smartphones. Better recycling practices are part of the solution and can also reduce material pollution. This is an increasingly important theme as consumers and regulators turn their attention towards single use plastic and sustainable packaging.
Productivity in food production
Finally, the need for increased productivity in food production present opportunities to chemicals and fertiliser companies, to machinery producers who reduce the need for human labour, as well as new technologies such as drones, predictive weather analytics and precision agriculture that are necessary to increase yield across the world.
Investing in climate change and resource scarcity with BlackRock & iShares
Our range of thematic funds offer a way for investors to tap into megatrends, which we believe gives investors exposure to companies with structurally higher earnings growth, which in-turn could drive stronger investment returns over the longer term.
Connect megatrends to investment themes
breakthrough ?
& social change ?
urbanisation ?
resource scarcity ?
global wealth ?
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Ageing
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Automation
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Digitalisation View fund
Digital
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Global Clean
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Healthcare
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Inclusion &
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Technological breakthrough
New technologies lie at the heart of resolving or accelerating the five megatrends. Breakthrough innovation is necessary to address large-scale challenges (e.g. ageing economies, climate change), while new solutions are also targeting relatively minor problems (e.g. payments, streaming). This backdrop has created a fertile ground for disruptive innovation and Thematic investing.
Demographics and social change
Changes in global demographics will bring significant challenges and opportunities for societies and businesses. The forces that underpin this megatrend include ageing populations in advanced economies and China, the outlook for future jobs, immigration pressure, skills imbalance and the radically different priorities of younger generations.
Rapid urbanisation
Cities have always been hubs for talent, capital and innovation. In the last decade, hundreds of large cities have been built in emerging economies, attracting significant infrastructure investments. Large cities such as San Francisco, London, Paris and New York have also been the ideal launch pads for entrepreneurs given their large, dense populations. Understanding the advantages and challenges of future cities can help us identify the next sources of growth.
Climate change and resource scarcity
An expanding population and the rising demand for food, energy and materials continue to strain the finite resources of the planet. The need for solutions that improve energy efficiency, lower food waste and provide alternatives to scarce resources has never been greater. Underlying these trends is the persistent increase in global emissions which has led to intensifying debates around climate change and how we can resolve it.
Emerging global wealth
In the last twenty years, developing economies have been lifted by the rising tide of globalisation and manufacturing shifting to Asia. The emergence of a sizeable, aspirational middle class, particularly in China, has made it an important destination for global companies. We continue to expect emerging markets to offer significant growth potential for domestic and multinational firms.
Ways to invest in megatrends with BlackRock and iShares
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THEMATIC INVESTING WITH BLACKROCK & iSHARES
Learn more about thematic investing and why we believe in investing in the long-term trends transforming the way we live and work.
