Investors are being urged to focus on “picking winners” in the energy transition rather than seeking diversification in their portfolios at PEI Group’s Impact Investor Global Summit today.
Speaking to a packed hall of institutional investors, fund managers and consultants and impact investing professionals, economist Dimitri Zenghelis, a special adviser for the Wealth Economy Project at the University of Cambridge’s Bennett Institute, argued that fossil fuel-based energy and other resource-intensive assets are on an irreversible trajectory of obsolescence. Investors should put all their eggs in the low-carbon transition bucket.
“The conventional theory of portfolio diversification” – splitting capital between traditional, resource-intensive sectors and low-carbon solutions – “gets challenged” by the transition. The low-carbon transition is already accelerating, said Zenghelis. Investors are at risk of being left behind if they hedge their bets and continue to invest in fossil fuels.
On which low-carbon technologies and solutions to back, Zenghelis said: “Businesses are going to have to pick the winning technologies. Making the right choice early matters.”
Investors “should spend a lot less time trying to fruitlessly predict the future and getting it wrong, and a lot more time understanding the process of innovation and helping to design and create the future”.
The conference continues in London on Tuesday and Wednesday.