Sustainable Equities Boutique

How to enjoy an impactful ride in a clean-tech open sleigh


Pascal Dudle

Head of Listed Impact, Portfolio Manager

Meet Pascal

Judging by the tacky Season’s Greetings cards we will soon discard, Christmas was the time of red-nosed reindeer and snowed-under Swiss chalets. But unless you live on higher altitudes, your kids were probably playing in roadside pools of water rather than frolicking in the delightful fluffy stuff. Still, there is cause for some optimism: America is returning to the fold of carbon-conscious nations, and there are lots of innovative companies out there helping to fight climate change.

Green pledges and white Christmas dreams

As if to make up for the vanishing white, countries are increasingly going green. In Asia, the three economic heavyweights China, Japan, and South Korea, plan to become carbon-neutral within a few decades. The European Union made a similar pledge a few months ago. And shortly after January 20, the day of Joe Biden’s inauguration as the 46th US president, the world’s second-biggest CO2-emitting nation1 is expected to officially re-subscribe to the goals of the Paris climate agreement. According to Climate Action Tracker, a consortium of climate-researching analysts, the recent developments put the Paris agreement’s two-degree global warming limit within reach, versus previous expectations of a warming of 2.7 degrees by the year 2100, the BBC reported .

Rising popular support

Critics may argue that green pledges are easy to proffer without putting the governments under much pressure to act. Even so, such ideas require bipartisan support. In the US, at least, Joe Biden may be able to realize his grandiose plans for a green economic revival now that the Democrats have secured a majority in both houses of Congress following a hotly contested race for two Senate seats in the US state of Georgia on January 5.

But politics aside, popular support for climate action is generally on the rise. Given that the big Asian economic powers’ start to take a leading role, such pressures are now clearly becoming more global.

Governments coordinate, companies innovate

Governments and regulators can play a significant role in tackling climate change, for instance by enforcing a system where companies can buy or sell carbon emission certificates, thus putting a price on pollution. Such a scheme is already in place in Europe for certain industry sectors. And yes, why not open up governments’ coffers to plant millions of trees in an internationally co-ordinated initiative? However, it is innovative companies that will do the legwork. Could you have imagined a few years ago that it would be possible to extract carbon from the air and bury it deep in the ground? Switzerland’s Climateworks , among others, does exactly that.

Renewable tide lifts some stocks

According to Credit Suisse research2, Joe Biden’s clean energy plan could qualify as a “renewable tide” that will lift all related sectors such as residential solar application, smart meters, hydrogen fuel cells, or utilities that generate renewable energy. Swiss Re said a sustainable recovery would require a new direction that includes more investment in sustainable infrastructure3.

This is in line with impact investing, an investment approach aiming to construct a portfolio of “green” stocks and enabling investors to measure the results. To mention a few: Ørsted, the world’s largest offshore wind operator, plans to have 15 gigawatts (GW) of installed capacity, corresponding to around three times the capacity of Europe’s biggest coal power plant4, by the end of 2025 versus 4 GW at the end of 2017. After getting rid of its remaining coal business by 2023, the Danish company’s operating profit will stem almost exclusively from green energy. Another example is California-based Equinix, a globally leading provider of data center capacity. Data centers can enable customers to use computing capacity more efficiently, but running them requires high amounts of energy to begin with. To address this problem, the company, which has cut carbon emissions by 60% since 2015, aims to source all of its energy from renewable sources. Or take Hannon Armstrong, headquartered in Annapolis near Washington D.C., which finances climate change projects in areas such as wind and solar power generation as well as energy storage. Thanks to its access to funding, the company is a typical enabler not only of public climate and energy efficiency initiatives, but also of rooftop solar installations for individual house owners. All of the above are industry leaders in their fields, which is also reflected in their share price performance.

Dashing through the snow some more?

Clearly, investing in “clean technology” stocks alone won’t save the world. But governments and companies now look more likely to combine efforts to break the seemingly inexorable rise in global temperatures. While this may not bring back dashes through the snow, it opens prospects of rides in a clean-tech open sleigh, especially if impact investors continue to shovel funds under the skids.  

1. According to US-based Union of Concerned Scientists, China emits 28% of global CO2, followed by the US with 15% (data as of August 12, 2020)
2. “Utilities and Alternative Energy, Thoughts on Biden’s Plan”, Credit Suisse Research Bulletin, July 16, 2020
3.“Rebuilding better”, Swiss Re, Sigma 7/2020
4. The capacity of Poland’s 13-unit strong Bełchatów coal power plant is 5.3 gigawatts, according to the NS Energy website.

For further information on performance and investment considerations regarding funds included in this Insight, please click on the respective "Related Funds" below.