The Pictet-Environmental Megatrend Selection will invest in Pictet’s water, clean energy, timber and agriculture funds – areas which the firm said it views as subject to persistent, secular change capable of generating rich investment themes.

The factors behind Pictet’s conviction that these areas offer long-term growth potential include changing global demographics and the increasing scarcity of water, timber and farming land. The firm has also noted a shift of energy production to more environmentally friendly methods.

The investment universe covering the funds underlying the Pictet-Environmental Megatrend Selection vehicle covers around 1,000 companies from both developed and emerging markets, with a bias towards small to mid cap firms. The underlying funds are managed individually, however the new fund will utilise a strategic allocation process with monthly rebalancing, the firm said.

“This fund is supported by solid long term fundamentals with excellent growth perspectives. We've focused our expertise in this field to provide investors with a diversified, structured and socially responsible exposure to environmental megatrends," said Laurent Ramsey, chief executive of Pictet funds.

Pictet is also keen to highlight the ESG (environmental, social and corporate governance) credentials of the new fund, as companies will be screened in collaboration with Ethos, the Swiss Foundation for sustainable development, and the firm will also be taking an active shareholder role in companies’ ESG affairs.

Much has been said about the potentially negative effects that ESG screening may have on returns, but advocates for this investment approach hold that responsible investing can actually act to mitigate risk as, for example, a company with poor environmental performance may be building up long term risks to its value.