This article originally appeared in Global Public Investor 2020.
As a result of the new socially-distanced reality, the digital economy could be relabelled the Covid economy. Investors are seeing an increasing pace of technological change, alongside a growing need to adopt and integrate innovation along all stages of the investment spectrum.
Early-stage technology opportunities are becoming more appealing, despite their high-risk, high-reward profile. Today, institutional and sovereign investors should view the digital economy and technological innovation as a vanguard against disruption and a champion for sustainability.
Before the pandemic, the pace of technological change had begun to restructure the foundations of the global economy. New technologies – such as data and energy storage, and renewable hydrogen infrastructure – are emerging to become tomorrow’s utilities and infrastructure.
Institutional investors kept abreast of these technological, regulatory and consumer driven changes by adapting asset classifications.
The virus outbreak has highlighted the role of technological innovation as an essential connector as international borders are shuttered and commercial activity disturbed at an unprecedented scale.
Even as the full impact of Covid-19 is still being mapped out, investors, consumers and governments have an opportunity to target capital towards building a sustainable future.
Technological innovation is powering climate resilience, decarbonisation and decentralisation. Sustainability drives investment performance through enhanced growth, as well as lower operational costs and reduced regulatory and legal intervention risks, among others.
The scope of an investor’s support should expand to a ‘technology ecosystem’ rather than individual technology enablers. For instance, the South Korean approach to prioritising investment in the ‘hydrogen ecosystem’ is inclusive of the production, storage and dispensation of renewable hydrogen. South Korea’s plans for a hydrogen ecosystem could transform the domestic economy, and has strong export potential for hydrogen technology such as fuel cells.
To succeed and manage risk, institutional and sovereign investors must understand the level of continual process improvements that must occur to ensure the resilience of their investments in a constantly changing environment.
To build a sustainable business, technological innovation must be embedded across all ‘life stages’ of a company: maintenance, expansion and re-creation. As such, innovation doesn’t just play a role in existing operations; it can play a positive, disruptive role in the latter stages as well.
Governments, through their fiscal stimulus post-Covid can support the shifting technological landscape to ensure long-term benefits. They can do this by providing regulatory certainty and early-stage funding to help business grow.
At QIC, we seek out innovations and innovators contributing to an investment environment to make the operations of a business fit for the future. All these ingredients can be combined to create growth and relevance for a reimagined, more sustainable future.
Tibor Schwartz is Senior Adviser, Asset Management at QIC Global Infrastructure.