GROWTH THEMES | THEME 4 CONSERVATION CAPITALISM

1. EditGenetics

2. Connected Commerce

3. Digital Reality

4. Conservation Capitalism

5. The Future of Manufacturing

4

GROWTH THEME

Conservation Capitalism

Doing More With Less

Everyone is talking about decarbonizing, and digitalization is helping make it a reality. Everything from cars to buildings to power grids are becoming more efficient.

Putting sensors in buildings and connecting those sensors to a centralized unit that lets you understand heating and cooling zones depending on different weather patterns lets you control the overall energy needs of that building.

Making electric vehicle (EV) batteries smaller increases driving range; in the near future, we won’t see cars with less than a 250-mile range, reducing a significant impediment to adoption.

And companies that aren’t decarbonizing are being starved of capital. As a society, we’ve marshaled resources to ensure we constrain the capital that fossil fuels can access, so it’s tough

for them to make acquisitions using their shares or getting bank financing. That evolution has been very important, not just from a shareholder perspective, but from a stakeholder perspective.

There are risks to this greener future. Hardening infrastructure for utilities used to involve putting overhead power lines below ground; now it must also prevent cyberattacks. But any slippage in global coordination around the commitments that we’ve made would also be a huge risk—perhaps an even bigger risk than cybersecurity.

In this, our fourth growth theme, we discuss renewable energy, smart infrastructure, and new business models, as well as how environmental, social, and governance (ESG) factors are accelerating these trends.

Everyone is talking about decarbonizing, and digitalization is helping make it a reality. Everything from cars to buildings to power grids are becoming more efficient.

Putting sensors in buildings and connecting those sensors to a centralized unit that lets you understand heating and cooling zones depending on different weather patterns lets you control the overall energy needs of that building.

Making electric vehicle (EV) batteries smaller increases driving range; in the near future, we won’t see cars with less than a 250-mile range, reducing a significant impediment to adoption.

And companies that aren’t decarbonizing are being starved of capital. As a society, we’ve marshaled resources to ensure we constrain the capital that fossil fuels can access, so it’s tough for them to make acquisitions using their shares or getting bank financing. That evolution has been very important, not just from a shareholder perspective, but from a stakeholder perspective.

There are risks to this greener future. Hardening infrastructure for utilities used to involve putting overhead power lines below ground; now it must also prevent cyberattacks. But any slippage in global coordination around the commitments that we’ve made would also be a huge risk—perhaps an even bigger risk than cybersecurity.

In this, our fourth growth theme, we discuss renewable energy, smart infrastructure, and new business models, as well as how environmental, social, and governance (ESG) factors are accelerating these trends.

How we manage emerging markets’ need to industrialize with our need to decarbonize will be an interesting diplomatic and philosophical question.

Alaina Anderson, CFA, Partner
Portfolio Manager, Global Research Analyst

WHAT ARE THE ENABLERS?

An increase in digitalization and decarbonization technology meets growing awareness of ESG considerations.

Targeting Carbon
Neutrality by

2050

Source: William Blair

Anticipation and Analysis—
Essential to Active Investing

As active growth investors, we seek to anticipate and analyze possible outcomes in a way other investment approaches cannot.

We are ultimately betting against the very powerful reality of mean reversion. The adage that “the more things change, the more they may stay the same” is powerful, and is often true.

But in reality, things do change. Consumer behaviors evolve. Humans innovate and create new solutions. Corporate profit pools shift. And new winners emerge. Just think about some of the things the world was predicting at the turn of the last decade.

And for now, the ability to predict changes is still the domain of humans. It is our job, then, to develop a practice of forecasting, which involves observing, learning, and anticipating the future.

Creating a framework for forecasting helps us decrease the variability around predicted outcomes, improve accuracy, and act on investment ideas earlier and with greater conviction.

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