Monday 7th March 2022
'Shocking and frightening' invasion of Ukraine uncovers long-term opportunity
Leading Australian ethical and sustainable fund manager Australian Ethical this week offered its views on the fast-developing crisis in Ukraine. “The invasion of Ukraine is a shocking and frightening event, and we can only stand with solidarity and in awe of the resilience and determination of the people of Ukraine,” said the investment team, while reiterating that AE has zero exposure to Russia or any company that manufactures weapons.
While there are many articles and experts highlighting opportunities to benefit from the events in Ukraine in the short-term, the investment team has instead focused on the long-term opportunities that this disastrous situation affords, specifically around higher oil prices and energy.
“Higher oil prices further support the investment opportunity represented by the development of alternative and sustainable energy generation and storage,” AE explains, highlighting that this is one way that the biggest driver of inflation can potentially be offset. But the manager also drew attention to the challenging position in which large parts of Europe have placed themselves, due to their reliance on Russia for gas and oil supplies.
“A reduction in dependence on fossil-fuel-producing countries may provide the world with greater resilience against geopolitical tensions,” highlighting that Europe and in particular Germany’s reliance on Russia has limited what was a “key potential sanction lever” that may well have helped to de-escalate the war footing more quickly. This is highlighted by reports that despite SWIFT bans, payments for energy are apparently still allowed.
The group remains committed to aligning its portfolios to “positive future-building industries like renewables, which have the scope to support better long-term investment outcomes for all, with greater energy independence and a resulting, more stable geopolitical landscape.”
On a positive note, AE highlights that of the ‘localised wars’ that have occurred over the last 50 years, the impact has generally been short-lived, with markets ending higher than when the war commenced. We have already seen the beginning of this as markets rallied following the initial shock and associated market selloff.
Investors are encouraged to stay focused on the long-term, with AE noting that markets will continue to focus on fundamental drivers like growth, inflation and interest rates, while also flagging that the positive megatrends occurring around the world are effectively unimpacted by these events; in some cases they may even be accelerated.
* The Australian Ethical Foundation contributes 10 per cent of profits towards various charities each year, with the Red Cross the selected charity to help those in Ukraine in 2022.
