Supertrends: Millennials Want to Invest Responsibly

Fifty percent of the world's population is under the age of 30, and the values of this generation – we refer to its constituents as Millennials – are set to become the norm. Therefore, we defined Millennials' Values (among them social and environmental responsibility) as one of five Supertrends – long-term themes expected to dominate in the coming years and provide attractive investment opportunities.

Responsible Generation

As a connected and truly global generation, Millennials feel collectively responsible. They care and prove it through their actions. Recent studies by Nielsen or Deloitte show that Millennials are willing to pay more for products and services seen as sustainable or coming from socially and environmentally responsible companies. As Millennials represent a rapidly growing consumer market, they influence companies' success by their choice of products. Also their investment behavior is influenced by their deep sense of responsibility. In our view, renewable energy providers, energy storage providers and electric vehicle manufacturers will benefit most from this trend, especially those that live up to environmental, social and governance (ESG) standards.

Energy Is the Key

One of main characteristics of Millennials is that they worry about the future of the environment and feel responsible for it. Thus, it is not a surprise that a study conducted by Deloitte in the USA showed that support for electric bill surcharges for developing renewable energy was highest among Millennials. In fact, climate change and global warming are one of the Millennials' major concerns. The main drivers behind man-made global warming are greenhouse gas (GHG) emissions. To slow or even reverse the trend, "clean tech" has emerged, resulting in renewable energy (like solar, geothermal and bio energy or hydro power), electric vehicles or smart buildings and a focus on energy efficiency.

According to the 2017 BP Energy outlook, renewables (excluding hydro power) accounted for about 7 percent of global power generation in 2015. This should increase to almost 20 percent by 2035, representing 40 percent of the growth in power generation. The strong growth is mostly attributable to lower costs; while the pace of cost reduction slowed for solar, wind power costs are expected to fall materially.

To Produce Is One Thing, to Store Another

Energy storage forms a key piece of future energy systems with higher (and less predictable) renewable generation. Global energy storage capacity currently stands at about 250 MW and is expected to grow to 14,000 MW by 2023. There are different types of storage: solid-state batteries, flow batteries, flywheels, compressed air energy storage, thermal storage and pumped hydro power. We see a lot of opportunity in solid-state batteries, particularly for lithium-Ion. Electric vehicles (EV) are another driver of battery demand. Based on the attractive outlook for batteries, plans are in place to build up to 12 new battery mega-factories in order to triple current battery manufacturing capacity by 2020.

This should support car industry in its shift toward electric vehicles (EV). The current consensus expectation is that EV penetration will rise to double-digit levels by the start of the next decade (from less than 1 percent in 2015). This means electricity and batteries production will have to increase as well. According to the second annual survey on EV from the Consumer, 36 percent of participants are interested in purchasing an EV. Young adults (18-34 years old) show the greatest interest, and half of survey participants would consider buying such a car.

With the growing electricity demands both clean energy production and storage are a promising investing opportunity.