Although green bubbles are emerging as a result of the sustainability boom, investors can find safer ways to tap into the climate transition theme.

This is according to Nikesh Patel, head of investment strategy at Kempen, who agreed that bubbles are emerging when investors invest in the theme too narrowly, giving the farmland sector as an example.

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‘If you invest only in listed farmland equities, and that became your focus – you are creating a bubble, because there are simply not enough farms in these listed vehicles to accumulate this much money.

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‘So if you keep on putting flows into those ETFs or those companies – you’re creating a bubble there and those farms and those particular underlying assets.’

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He added that Kempen’s team is trying to define if a particular bit of land or farm in a portfolio is worth the implied value of the listed price or if it is better to buy the underlying asset directly.

‘Therefore you get it at its proper value, not its inflated value,’ he said.

Patel said institutional investors are able to do this, as they can access most asset classes in both listed and unlisted formats.

He added that investors who are limited to only listed markets have to be aware that they could be buying into a bubble, simply because there is not enough supply.

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