15 December 2022 Figure 17: EMU profit margins vs economic confidence 50 9 40 8 30 7 20 6 10 5 0 -10 4 -20 3 -30 2 -40 Consumer confidence (y/y) 1 Industrial confidence (y/y) -50 EMU net profit margin (9m lag - % - rhs) 0 2003 2006 2009 2012 2015 2018 2021 Sources: Worldscope, Refinitiv Datastream, Allianz Research Board the ESG train. Even though the current energy crisis outperformance of such assets vis a vis ESG laggards. will most likely lead to a relative outperformance of oil & Embracing the ESG transition within capital markets gas sectors and of energy-rich countries in the short run, is likely to act like a downside hedge since most new the ESG trend will continue to gain relevance in the next money and investment strategies will inevitably be two years. Investors are likely to continue transitioning to scrutinized based on ESG principles. As it is well known, ESG-intensive investment strategies, with most fresh capital “the trend is your friend” (Figure 18). being deployed with such a sustainable bias. This new market rebalancing act is bound to generate a structural Figure 18: Infrastructure investment by type 80% Solar Wind Other Ren. Gas (broad) 60% Fossil fuels Other non-Ren. 40% 20% 0% 2010s Post Covid 2010s Post Covid 2010s Post Covid 2010s Post Covid 2010s Post Covid US Germany France Spain Italy Sources: Refinitiv Datastream; Allianz Research. Notes: “Ren.” is used as abbreviation of renewables in “Other ren.” and “Other non- ren”; the category „gas” includes LNG and regasification plants; the category “other renewables” includes geothermal, biomass and hydroelectric. 25