The arrival of a more protectionist US administration favouring deregulation and fossil fuels may be seen as hindering the energy transition and climate action. Ed Lees, Co-head of our Environmental Strategies group, explains why it is not  that simple. He talks to Chief Market Strategist Daniel Morris about the countervailing forces such as state-level – not federal – environmental standards, the hard-to-dispute economics of green energy, and the jobs that current policies have created.

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What are the implications of Donald Trump re-entering the White House with his Republican party in control of both chambers of the US Congress? Listen to this Talking Heads podcast on these questions with Chief Market Strategist Daniel Morris and Andrew Craig, Co-head of the Investment Insights Centre.

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How and why are investors using thematic investment strategies? Listen to this Talking Heads podcast with Mark Buckley, Global Head of Investment Management with Coalition Greenwich, and Andrew Craig, Co-Head of the Investment Insights Centre.

To read the full report, visit our 2024 Thematics Barometer page.

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The sell-off in bond markets this year has driven yields to levels that merit closer attention, says Victoria Whitehead, senior portfolio manager for European investment-grade (IG) credit. Victoria sees eurozone IG credit as attractive on the basis that risk premia are commensurate with much higher default rates than she thinks will actually materialise. 

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Slower growth (and eventually, lower rates of inflation) will likely come in 2023 thanks to restrictive central bank monetary policy. What conclusions should investors draw for their allocations to equities and fixed income around the world? 

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Thematic environmental strategies face countervailing forces in the near term. Support may come from the ‘green shoots’ of the recent growth stock recovery, offset by the downdraft of recessionary risk. Investors with a longer-term view should stay focused on the tailwinds and enduring drivers of demand including regulatory and legislative support. 

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While many bond investors have felt the earth move under the feet this year as the asset class experienced the finale of a 50-year bull market, the denouement has not stripped them of opportunities, Arnaud-Guilhem Lamy, head of euro aggregate bond management strategies, tells chief market strategist Daniel Morris. 

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As part of its contribution to the low carbon energy transition, BNP Paribas Asset Management is taking action and implementing best practice, including in its investment strategies. This includes working with clients on decarbonisation and setting internal targets to progressively increase the share of assets under management aligned with net zero greenhouse gas emissions. 

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The tide is rising for water as an investment theme as it benefits from a growing awareness of both climate change and years of underinvestment, particularly in water infrastructure. This focus should have a direct positive impact on companies providing water solutions, Justin Winter, water strategy co-manager, tells Andrew Craig, co-head of the investment insights centre. 

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Tumultuous geopolitical and economic times may be clouding the prospects for the high-growth renewables sector now, but investors should not lose sight of the longer-term potential of areas such as solar and green hydrogen, Edward Lees, co-head of the Environmental Strategies Group, tells chief market strategist Daniel Morris on our weekly Talking heads podcast. 

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Thematic investing, which centres on the long-term forces that shape consumer needs and industries, is a way for investors pivot away from traditional 60-40 portfolios to a broad and diversified set of opportunities that can create market-beating returns spanning several generations. 

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Investors shell-shocked by the fallout from high inflation, rising interest rates and slowing economies and looking to alternative markets for portfolio diversification and attractive returns might want to consider a relatively young and little known asset class: direct small lending.

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While equity markets are feeling the pinch from rising real rates, earnings reports and guidance are yet to reflect the effects of the encroaching recession. This leaves markets vulnerable to a downside correction once the message sinks in. 

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Stewardship is the direct engagement between us, BNP Paribas Asset Management, as investors and the companies we invest in. Listen to this Talking Heads podcast with Rachel Crossley, Head of Stewardship for Europe within the Global Sustainability Centre at BNP Paribas Asset Management, and Andrew Craig, Co-head of the Investment Insights Centre.

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It is all hands on deck to deal with the current energy crisis, even if that forces countries to use more polluting fossil fuels to meet energy needs especially in the coming winter. However, that does not mean the transition to renewable resources should end up on the backburner. Instead, there is a clear case for accelerating the move to solar, wind and other sources of clean energy. 

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Senior secured corporate loans are debt instruments similar to high-yield bonds in that they are rated below investment-grade (Ba1/BB+). They differ from high-yield in that they are senior secured instruments, secured by all assets on a company’s balance sheet. In addition, as floating rate instruments, global loans are relatively immune to the adverse impact of rising interest rates.   

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The summer has seen a sharp deterioration in prospects for the the euro area economy. The cost of living crisis is hitting consumers’ pockets hard. Europe’s manufacturing sector is contracting while momentum in the services sector is slowing. To make matters worse, wholesale energy prices have soared to all-time highs in Europe as Russia throttles gas supplies. 

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As a broad asset class underlying the full spectrum of economic activity and a non-cyclical slant, infrastructure debt has attributes that stand out for investors. One key point is that many of the services financed with these bonds are indexed, protecting cash flows from rising inflation. Also, the debt typically has floating rate coupons that are adjusted when interest rates rise. 

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Base effects, lower (or less high) energy and raw materials prices and a broad economic slowdown later in the year may see eurozone inflation stabilise or retreat towards the end of 2023. However, for now, an inflation-busting ECB will likely keep its foot on the monetary policy brake and could soon even raise policy rates by a chunky 75bp rather than the more widely expected 50bp. 

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Senior investment specialist for global equities Ramon Esteruelas briefs chief market strategist Daniel Morris on four books he has read on climate change. The books discuss the relevance of climate change science and the reliability of projections, the availability of adaptive and mitigating solutions and breakthroughs, the long road to net zero, and the need for a rethink on growth.  

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Until recently, humanity has relied on chemical solutions to address its biggest challenges. For example, our ability to grow food, to defend livestock against disease and to safeguard human health, all depend in part on chemical solutions. Today is no different. Yet resistance to chemicals is rising rapidly, exacerbated by climate change and ecosystem degradation.  In the second of this series, Ulrik Fugmann and Edward Lees, co-heads of our Environmental Strategies Group, talk to Andrey Zarur, CEO and co-founder of GreenLight Biosciences, about how his company is using RNA technology to create a new generation of chemical free pest control methods. They consider the benefits of such innovations including enhanced food and biodiversity security, as well as the growing role investors can play in this area. The uncapped impact series brings you up close and personal with our Environmental Strategies Group and businesses that, regardless of their size, are making a big impact. 

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While day-to-day ‘market noise’ may feature big in many investors’ minds, it is worth mining long-term structural trends as well for opportunities. Cloud computing is one such trend, offering many advantages to both public and private sector users of its services and to investors looking for a billion-dollar industry where growth is still in the early stages. 

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Listen to this Talking heads podcast with Christophe Montcerisier, head of real estate debt, and chief market strategist Daniel Morris. They discuss the absence of a direct and immediate link between higher interest rates and the performance of real estate debt and the defensive characteristics of the asset class. Among other things, its solidity derives from some of the pandemic-induced structural changes, including a shift in office use and greater demand for suburban properties. 

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Listen to this Talking heads podcast with senior portfolio managers David Favier and Olivier Boutoille and Daniel Morris, chief market strategist. They firstly discuss the current market environment before focusing on the advantages of investing in these floating rate instruments that offer varied risk/returns profiles for investors.

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Emerging market debt has had a strong run since the start of 2024 with positive performance across the universe of sovereign issuers. Listen to this Talking Heads podcast with Alaa Bushehri, Head of Emerging Market Debt at BNP Paribas Asset Management, and Andrew Craig, Co-head of the Investment Insights Centre.

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Food security has shot to the top of the agenda for governments and economists, but also investors. The war in Ukraine has highlighted the fragility of cross-border supply chains and countries’ dependence on food imports. More localised production is one potential answer, another is vertical integration to reduce a food company’s vulnerability to the whims of external sources.

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The rapid growth in sustainability investing in recent decades has bolstered the need for greater transparency as investors increasingly want to know where and how sustainably their money is invested. MiFID II and other regulations have taken on more of a sustainability focus to improve the flow of information from issuers, distributors and asset managers.

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In an investment environment laden with challenges from rising interest rates to a possible global slowdown, listed real estate comes with advantageous features such as inflation-resilient cash flows and better liquidity than bricks and mortar. As such, listed real estate is a portfolio diversifier offering investors attractive risk-adjusted returns over the long haul. 

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Investing with a view to a sustainable future has often focused on environmental and governance issues – the ‘E’ and ‘G’ of ESG. However, the path towards a more inclusive society means social factors should be considered more actively as well, argues Delphine Riou, ESG analyst and Inclusive Growth lead, as she points out the significance of the ‘S’ for social in achieving sustainable corporate performance. 

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Disruption of supply chains is just one factor investors in new technologies currently have to contend with. A fundamental reevaluation of the outlook for US interest rates and as a consequence, the pricing of growth stocks, is another. Pamela Hegarty, disruptive technology portfolio manager, talks about how the themes she sees shaping future technological trends provide her with reference points in assessing today’s opportunities and risks.   

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Private equity impact investing offers investors access to an attractive asset class that can help diversify a portfolio and earn attractive returns. In addition, it offers an extra-financial component by enabling them to contribute – and help finance – solutions to pressing social and environmental problems from access to healthcare to promoting a circular economy. 

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US small-cap stocks are trading near 10-year lows on various metrics, which disregards their  typical resilience in periods of rising interest rates and slower economic growth.  

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In early March, Chinese policymakers announced economic growth of around 5.5% would be targeted for 2022. Since then, a number of headwinds have led to doubts China’s GDP growth will reach 5%. In this podcast, we explain why we believe Chinese policymakers have both the intention and the means to counter factors potentially slowing growth in the world’s second-largest economy.  

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Value investing remains a worthwhile approach, even after an extended period of underperformance. A rebound has now set in that looks sustainable. Rising interest rates should be supportive of the value style and value still looks cheap relative to growth. 

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Foreign exchange (FX) markets can be viewed as a derivative asset in that they tend to be driven by volatility in other asset markets. Since 2015, most of the leading currencies have traded in relatively confined ranges. With volatility rising in equity, bond and commodity markets, there are good reasons to expect a new regime in currency markets.  

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Inequality may not be an obvious factor when assessing the prospects of a company. Yet, it is financially material, impacting productivity and well-being. As such, it can make a crucial contribution to a healthy society and stable economy. Equality Lead and ESG Analyst Sindhu Janakiram discusses these issues with Chief Market Strategist Daniel Morris. Static categories of winners and losers stand in the way of equal opportunity and social mobility.

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Inflation has bounced back vigorously from its pandemic-era lows: The headline rate for the US consumer price index has reached a 40-year high, while in the eurozone, the headline rate for the harmonised index of consumer prices is at its highest in 20 years. What does this mean for investors? 

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To help multi-asset portfolios cope with the geopolitical shock of Russia’s invasion of Ukraine, a move into cash can be useful. At BNP Paribas Asset Management, we have implemented such an approach to ride the recent market volatility and use bounces to sell assets whose fortunes have now changed and build or expand other, more defensive positions at attractive prices. 

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Global bond markets already faced challenging times before the conflict in Ukraine, but they at least had a clear expectation to work with: the prospect of firm central bank action to tackle rising inflation. Geopolitical developments have upended the calculus, undermining inflation and growth forecasts and weakening the fundamentals across the board for the foreseeable future. 

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Global markets have seen wide swings as concerns over tighter supplies and crimped trade in the wake of Russia’s invasion of Ukraine caused investors to head for safe havens away from risk assets. However, Guy Davies, chief investment officer for fundamental active equities, advises against impulsive action and argues for a focus on cash flows when picking promising stocks. 

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Heightened market volatility and uncertainty over the pace at which the ECB will unwind its bond purchases are the main tests investors in European corporate bonds have to contend with currently. Mitigating factors such as robust earnings, strong cash positions and low defaults could be negated by concerns the central bank might need to take tougher action to contain inflation. 

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Investing in water-related stocks means tapping into a multi-decade opportunity for growth and innovation. Demand in this segment stretches across the breadth of the economy – from tackling ageing water infrastructure to ensuring healthy drinking water and efficient waste water treatment. 

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Chinese equities look well set to confront the challenges that Omicron, stricter regulation and moderating growth will bring. Revised earnings expectations and valuations mean their  second-half prospects are brighter. Looser fiscal and monetary policies have the potential to provide a further uplift for sentiment. 

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In a contrarian call, our emerging market debt team sees appealing opportunities in EM bonds. Specifically in those markets where inflation is likely to peak ahead of developed markets in which investors are having to adjust to the prospect of higher real yields. EM segments that were oversold late last year also represent areas worth investor attention as a recovery takes hold. 

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Our Environmental Strategies Group talk to businesses that, regardless of their size, are making a big impact. In the first of this series we speak to John Berger, CEO of Sunnova Energy International, a residential solar and energy storage company, about the energy transition and the role investors can play in fighting climate change.   

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The prospect of a momentous pivot in US monetary policy with gradual withdrawal of the generous provision of liquidity has left markets pondering over valuations. Investors face a challenging year in which they will need to search for assets suited to a new inflationary regime. On our Talking heads podcast, Daniel Morris, chief market strategist, and Andrew Craig, co-head of the Investment Insights centre, discuss the outlook for fixed income, the promise of emerging market debt (and currencies), the prospects for corporate bonds, and the areas of – longer-term – interest once equity valuations have normalised. 

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In this episode, CMO Pieter Oyens talks to Daniel Morris, Chief Market Strategist, about fixed maturity plans which allow investors to lock in interest rates for three, five or seven years, thus capturing a regular flow of coupon payments. The plans, which can take the form of a mutual fund or an exchange-traded fund (ETF), are timely in that short-term interest rates have now peaked, and leading central banks are beginning to lower them now that economies have plateaued and inflationary pressures in job markets are wearing off.

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To tackle poverty, climate change and improved access to, for example, education, central banks and governments need to rethink fiscal policy and the impact of deficit spending. Trillions of US dollars are required to achieve these goals. Alex Bernhardt, global head of sustainability research, talks about how it could be done. 

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At first sight, tighter US monetary policy and stubbornly high US inflation does not seem an ideal mix for bonds. There’s a lot more to it than that, argues James McAlevey, head of multi-sector fixed income. By embracing a broad opportunity set, investors can benefit from the potential for attractive risk-adjusted returns offered via active allocation. 

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The set-up for financial markets is more challenging in 2022, especially for core government bonds and fully valued equities, given the prospect of higher interest rates. In our new Talking heads podcast, Maya Bhandari gives her analysis of what this means for asset allocation. 

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