Yicai TV | Laurent Ramsey: Sustainable investing opportunities transcend policy and politics

The main purpose of this trip here in Shanghai is to open our exhibition here in this very iconic hotel, the Peace Hotel. Actually, Pictet has launched a photography prize based on environmental sustainability to try to raise awareness on the issues linked to the environment by harnessing the power of photography. And today it is the largest sustainability photography prize in the world.

That's a good question. It's true that both the US dollar and the US equity market have performed very well. And if we look at past US elections, typically market performance and asset prices have started to come down a few months after. So we can expect the rally to continue a bit, and eventually fundamentals are going to take over politics. So it will very much depend on what policies are actually implemented.

Listen, what we've seen is that following the demise of the market in 2022, investors have piled in cash. So we've seen huge inflows in money market funds both in 2023 and in 2024. Now, post US elections, we see investors redeploying that cash because of a couple of things. First, obviously the uncertainty leading to the election is behind us. Second, short-term rates are starting to come down, so the opportunity cost of staying in cash is going up. We see yield curve steepening, we see correlation between bonds and equities turning negative, we see the cost of leverage going down, we see M&A and IPOs gaining momentum again. So there are a lot of dynamics in the market that are positive for clients to redeploy their cash into more risky assets. Now, you have to do it in an intelligent way, and I think the name of the game looking forward is going to be to diversify your risk.

But if I may add something as well — in periods of expected volatility to go up, in periods of high uncertainty, I think there are two things that investors need to keep in mind. One is you need to be nimble. So I think multi-asset strategies that can move relatively fast between asset classes is always good when volatility is high and the trend is not so clear. Second is keep long-term as your investment objective. We are in the business of investing long-term savings. Long-term means more than four years, more than the Trump administration. I think if you are investing for your old age, you need to always remember that your investment time horizon has to be long-term. I think one of the biggest challenges of the industry is the short-termism, and investors tend to buy high, sell low. So when there's a storm, look at the horizon.

Listen, I think that ESG and sustainable investing has had some headwinds linked to policy or politics, linked to regulation, linked to performance as well. So if I look at policy and politics, which is the point that you are addressing, we've seen countries coming out of their commitments. But what we need to remember is that the train has left the station. The energy transition is happening and is economically viable. We need to remember that solar and onshore wind production and cost is much cheaper than most other energy sources. Second, it is less volatile because you have abundance of power through new energy sources, unlike oil and gas. Third, today according to the last IEA report, the new energy sectors are employing more people than oil and gas, so its contribution to the economy is massive. So there are some very strong forces at play that transcend policy and politics.

No, I fundamentally believe that no, it cannot change. The only question is the pace at which the transition is going to happen. Look at China — I think China is a magnificent example of a fast-paced transition. In 2023 alone, China has added 217 gigawatts of power from solar. In 2023 alone, this is almost twice as much as the entire US solar production capacity. In 2023, China has invested 650 billion in the energy transition, whether it is in solar, in EVs, in storage, in the grid — this is twice as much as the whole of Europe. So this gives me hope.

Listen, we think the opportunities are plentiful. China is leading in 80% of the sectors that are linked to the energy transition. So we think there's a magnificent opportunity here for investors to play both China and the energy transition. Now, it has not yet materialized in strong investor interest because international investors are still a bit worried about China from a macro perspective. But as soon as the interest comes back, I think this is going to be a fantastic play.

Yeah, I think it is. But on the other side, China and policymakers have the ammunition to counteract on US policies going forward. I think we've already seen in September and October massive stimulus — monetary and fiscal stimulus — and I think there's still some room to do more in case Trump goes ahead with 60% tariffs on Chinese imports. If we look at the Chinese equity market cap as a percentage of money supply, we're at a 20-year low. So that gives you an idea of the dry powder that still exists and the room that policymakers have to mitigate the impact of potential tariffs.