Approach growth differently: think development, not just GDP

Targeting just GDP growth is increasingly a thing of the past. To achieve their growth goals sustainably, investors must take a broader view and incorporate development considerations when assessing investible opportunities.  

The way of defining economic success has evolved over time and the old way of relying on quantitative metrics is becoming outdated. Increasingly, people are looking beyond headline GDP numbers and demanding an economic model that is fairer, more inclusive and sustainable.

To capitalise on this shift, investors need to think in terms of economic development rather than growth. Development puts in place the foundations on which long-term, high-quality economic progress can be achieved. 

This shift in mindset is increasingly important in reshaping how the world thinks about investment opportunities and is enabling investors to differentiate long-term winners from losers.

Where to find opportunities

Using the new lens, we can categorise investment opportunities into three key drivers of sustainable economic development — economic progress, social evolution and sustainability.

Economic progress
Opportunities in economic progress include development drivers that capitalise on the growing efficiency in the production of goods and services with the help of increased application of new technologies and scientific insights. Beneficiaries of such advances could be found in areas like automation, robotics and digital and physical infrastructure.

Social evolution
Social evolution is accelerating thanks to improving living standards and supportive governmental policies. As health care, education and financial services become more accessible, we see a change in behavioural patterns and new investible opportunities. 

Sustainability
Sustainability-led opportunities reflect global concerns about climate change, pollution and overconsumption. These issues have put the spotlight on how businesses are using available resources with due consideration for future generations and the environment. Investible ideas span renewable energy, waste management, recycling, water treatment and other clean technologies as well as testing and diagnostics.

Theme spotlight: energy transition

• Over 180 countries have ratified the Paris Agreement to limit global warming, and most of these have committed to net zero carbon emissions by 2050. 
  
• The coming years should see significant investment in research, development and infrastructure to enable that transition away from heavily polluting fossil fuels.  
• Energy providers involved in wind, solar and other renewable sources that are compensated based on investments in their infrastructure are likely to be key beneficiaries.

Bottom line

The old way of measuring economic growth through GDP is outdated. A new development-focused approach that looks past the headlines and goes beyond traditional definitions can yield a host of new ideas. Turning these ideas into investible insights that drive long-term returns requires expertise, creativity and an unrelenting focus on finding and exploiting underappreciated opportunities. Investors can help to drive this change today and to define the future of our society. By tapping into themes of economic development, they can not only seek to shape a fairer, more sustainable world but also potentially grow their own wealth to pass on to future generations.