Clean energy funds once again a focus for investors
3 April 2014. As the significance of the sustainable use of resources increases, investments in renewable energy funds also increasingly attract investors. The massive smog in China’s capital and the unstable situation in Ukraine demonstrate the necessity of such involvement. The renewable energy sector is gaining significance worldwide and offers opportunities for intelligent, future-oriented investments. This significance can also be seen in the stock prices. The index on the general market increased by 10.2% in the first quarter of 2014.
The market for renewable energies is clearly growing: in the last 12 to 18 months, an unbelievable dynamism has developed, due on the one hand to the current concern about energy supply security, such as in the case of Ukraine and, on the other hand, the growing need to address the problems of environmental pollution.
‘Newly industrialising nations such as China, India and Brazil are currently making massive investments in this sector. With a share of nearly 30% of the money provided for renewable energies worldwide, China has even surpassed the USA,’ says Jon Sigurdsen, co-portfolio manager of the DNB Renewable Energy Fund. China has strongly increased its share of renewable energies in terms of overall energy production in recent years and intends to increase this to about 15% by 2020. This is motivated both by environmental problems as well as the intention to position itself within a growth area as quickly as possible.
China will become the largest market for solar and wind energy this year. At the same time, it will make the world’s largest investments in terms of grid infrastructure. As this concerns nothing less than the quality of life of its billions of inhabitants, China will continue to make such investments in the coming years. As a result, China will continue to number amongst the key markets in the sector of clean technology.
Sustainable industrial sectors create jobs
Interesting companies are also emerging in other countries. French company Valeo and US company Owens Corning have both reported outstanding business results. A study by ABF Economics shows that nearly 400,000 new jobs have already been created in the US industry for bioethanol. Not only has this sustainable industrial sector created new jobs, it has also been able to contribute to the US reducing its oil imports by 13%.
Bioethanol is also an important growth field in newly industrialising nations such as India, where investments have doubled in recent years since price increases on oil imports forced a search for alternatives. As the price of sugar fell at the same time, domestic ethanol production became even more attractive. At the same time, the ethanol sector is gradually incorporating technological advancements, offering the companies the prospect of higher margins.
The trend towards clean and smart technologies also continues to be reflected on the political level. The markets in many countries are supported by marked incentive systems. For example, US President Barack Obama recently announced a schedule for new fuel efficiency standards for trucks. He is convinced that the stricter standards support the development of new technologies. This megatrend towards energy and fuel efficiency is one of the central topics reflected in the DNB Renewable Energy Fund investments. The fund is invested in Cummins, one of the leading independent truck manufacturers. The new efficiency standards could significantly increase the margin potential of Motors ASP, which was developed by Cummins.
Solar energy becomes increasingly competitive
‘Innovations in the field of solar energy are making it distinctly more competitive,’ says Christian Rom, co-portfolio manager of DNB Renewable Energy, with a positive view of this sub-sector. A study by Germany’s Fraunhofer Institute shows that costs for solar roofs in southern Germany have fallen – with positive results for competitiveness in comparison with grid-based electricity. The costs for solar energy in sunny regions such as Australia, southern Europe, Africa, Latin America and the Middle East have fallen ever farther. In certain regions of the USA, such as California, Hawaii and Minnesota, electricity produced from solar energy is already as inexpensive as traditional energy.
Investor interest returns – a sector with momentum
‘All in all, investors are showing a growing interest in renewable energies. In recent quarters, the fundamental data has significantly improved in conjunction with the global outlook. Increased liquidity and higher stock prices clearly illustrate the positive momentum,’ says Jon Sigurdsen, summarising the current stock market situation. The WilderHill New Energy Global Innovation Index can demonstrate an outstanding start to 2014. The companies in the Index that are part of the new energy sector surpassed the MSCI World Index by 10.2%. While valuations slightly increased, to 10.9 EV/EBIT, they remain substantially below the level of the wider stock market.
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