Over the long term, economic growth has resulted in huge improvements in the quality of life for people around the world. 
Since the start of the Industrial Revolution, global poverty has fallen from 90 per cent to 10 per cent. Life expectancy at birth has more than doubled, from 29 years to 72 years, largely due to better nutrition, improved hygiene and new technologies and scientific discoveries. Finally, with greater prosperity, more people have received an education, with the global literacy rate improving from 12 per cent to 86 per cent between 1800 and 2016.
If we want to create a prosperous, sustainable and inclusive future, then economic growth is not the problem, but part of the solution. Innovation is key, and supporting this process is the most valuable activity the investment community can do.
We need to solve the obvious environmental challenges our planet is facing, but also ensure that addressing those doesn’t undo the tremendous progress human civilisation has achieved to date. This is why innovation will play an important role in addressing these challenges.
Energy transition
Our earliest ancestors derived all their energy from the food they ate, but today energy used in everyday life is 20 times greater than energy consumed as food. The extra energy heats our homes, lights our streets, enables us to travel long distances and makes possible all sorts of products, from life-saving drugs to smartphones. The downside of this is that 80 per cent of this supply comes from fossil fuels and we need to find a more sustainable alternative quickly.
The most promising strategy for the energy transition is to electrify all our energy consumption and supply all electricity from clean renewable sources, such as solar, wind and hydro. Tesla has shown the way in electrifying personal mobility, but we desperately need similar innovations in other areas, such as heating and industries.
Elsewhere Ørsted is pioneering the offshore wind industry. It’s the world’s largest developer of offshore wind and in 2019, compared to fossil fuel generation, its heat and power generation helped to avoid 11.3 million tonnes of CO₂ emissions.
To overcome renewable energy’s intermittency challenge, we also need better storage and grid technologies, and all these areas present exciting investment opportunities over the long term.
Sustainable food & agriculture
The UN medium projection variant forecasts there will be nearly 10 billion people on Earth by 2050. In addition, more people will demand a developed diet, and it’s expected that global food production will need to increase by up to 70 per cent to meet the rising demand.
At the same time, agriculture incurs an enormous environmental impact, but innovation can help make agriculture more sustainable while meeting growing food demand.
A good example is precision agriculture. By combining technologies including sensors, satellite communication and software, companies such as John Deere are helping farmers to increase yield while using less fertilisers and pesticides.
Plant-based protein is another interesting opportunity. Beyond Meat is aiming to make plant-based food mainstream by appealing to traditional meat eaters with products that mimic the taste and texture of animal meat. And longer term, indoor vertical farming could be a promising technology. Growing crops in a controlled environment closer to cities should reduce the need for water and pesticides, and cut down on food waste due to transportation.
Inclusive development
Finally, there are still more than 700 million people globally living in extreme poverty. A prosperous and sustainable world needs to be inclusive, where the vast majority of the people feel the benefit of economic growth. Development is multi-dimensional and businesses are only part of the solution, but companies and innovations nevertheless do have a role.
We are particularly excited by the opportunity of leveraging digital and mobile technologies to deliver essential services in a more accessible manner and provide job creation. MercadoLibre, Latin America’s largest e-commerce platform, serves as an excellent example. MercadoLibre’s e-commerce platform connects millions of merchants and consumers, providing a more convenient and efficient way to trade, and its online and mobile payment service enables small businesses and consumers to transact and access financial services with far greater ease.
Innovation requires patience and long-term thinking
The market’s obsession with quarterly earnings is utterly unhelpful for companies like these who need time to pursue disruptive innovation. Investors must think about the next five, 10, 20 years and be willing to back companies over those time periods.
One of the most valuable actions investors can take is to encourage companies to invest for the long term because ultimately, when directed at solving societal challenges, patient entrepreneurship and innovation can be a powerful force for driving positive change.
Lee Qian is co-manager of the Keystone Positive Change Investment Trust and the Baillie Gifford Positive Change fund. The views expressed above are his own and should not be taken as investment advice.