Investing smartly in the energy transition
Floods, forest fires, mass migration and the destruction of biodiversity are just some of the consequences of global warming that we are already feeling strongly. As the energy sector produces two thirds of greenhouse gases, we need to reduce emissions in this area in particular very quickly. But this is only possible if we consistently drive forward the energy transition.
Lots of money must be channelled into renewable energies (regardless of geopolitical necessities). Future-orientated energy production and promotion, as well as responsible energy management, are the order of the day. Investors can support the fight against global warming through targeted ESG investments, i.e. investments that take sustainable criteria into account.
Fund portrait Raiffeisen-SmartEnergy-ESG Aktien
The fund Raiffeisen-SmartEnergy-ESG-Aktien invests specifically in companies from following areas:
renewable energy,
energy distribution (smart grids)
efficient use of energy (smart city, green buildings),
energy management (energy meets IT),
energy storage, and
transport (smart mobility).
Growth opportunities intact, but not equally everywhere
The fund Raiffeisen-SmartEnergy-ESG-Aktien focus on those trends in the energy sector that will characterise the next decade. Numerous companies are involved in the transformation of the global energy supply, both enabling it and benefiting from the energy transition. These companies, which belong to smart energy, are selected by the fund management from the entire global equity universe.
Many smart energy sectors continue to offer good growth opportunities and thus the prospect of attractive returns. However, careful selection is important. After the initial general euphoria, when stock prices in nearly all areas related to renewable energy rose, the markets are now differentiating much more strongly.
Demand for building refurbishment and grid expansion remains high
While the growth trends for wind and solar energy, for example, are intact (albeit weakened in some cases), have become disillusioned and cautious when it comes to hydrogen.
By contrast, strong growth and a correspondingly good stock performance can be seen in those sectors that are involved in expanding electricity grids or improving the energy efficiency of buildings. These include, for example, companies that operate "intelligent" energy grids or equip them with the corresponding hardware and software (e.g. smart metering) or provide important components such as cables, switching electronics and the like.
Battery storage solutions are on the rise, whether for mobile applications (e.g. electric vehicles) or large stationary electricity storage systems.
Furthermore, the ambitious climate targets – keyword Paris Climate Agreement or the EU Green Deal – can only be achieved if much more is invested in the energy efficiency of buildings. For example, 35% of buildings in the EU are currently over 50 years old and 75% of buildings are not considered energy efficient. As part of an EU renovation campaign, more than 200 billion euros are to be invested in this area every year until 2030. Industrial and IT companies that are active in areas such as thermal insulation or electrical and digital building infrastructures can benefit from this. (Source: EU Commission).
After soaring for several years, the equities of wind and solar power companies as well as electric cars have come under heavy pressure in recent years. Not because the issues of climate change and the
There are also new political uncertainties, such as Trump's election victory in the USA. After an initial boom, demand in the electromobilitysector is currently falling well short of original forecasts, especially in Europe. To be fair, however, this is also a result of the generally weak economy in the EU, which is also dampening demand for cars with combustion engines. In China, on the other hand, the market is booming and Chinese e-car manufacturers have become serious competitors for the European and US automotive industry within just a few years.
Interest rate trend weighs on the industry
Both companies as well as most analysts and investors assumed that business activity in the wind and solar sectors would noticeably pick up in the second half of 2024. This did happen to some extent, but one fundamental assumption of this expectation was not met: declining capital market interest rates in the USA, which would, in turn, improve financing conditions and the profitability of many solar and wind projects. Despite initial rate cuts by the US Federal Reserve, bond yields for longer maturities actually increased. While there is still a general prospect of further rate cuts in the USA, current expectations are that these will be very limited. Much more than 0.25% to 0.50% is not anticipated for 2025. Therefore, there will be little support from this side for the foreseeable future.
Politically, everyone is eagerly awaiting the extent to which Donald Trump will or can cancel and reduce subsidies and incentives for renewable energy projects. In any case, the new US government is unlikely to provide any tailwind. However, the financial markets have already priced in a number of potentially negative measures.
There is much to suggest that many companies in the energy transition sector are currently bottoming out or have already bottomed out, and that the foundations are currently being laid for the next share price upturn. This is all the more true as the wind and solar sector is now valued more favourably in many areas than the stock market as a whole, especially in the USA. There is no guarantee of this, but there is a very high probability. And despite short-term headwinds, new wind and solar power plants are constantly being built.
Growth has certainly slowed in some areas and regions. But there is no end in sight to the expansion of renewable energies.
With electricity consumption continuing to rise and the need to integrate ever larger quantities of fluctuating electricity sources (wind, solar), the electricity grids must also grow with it. We therefore continue to see particularly good earnings opportunities in this area.
Despite the current slump in electric car sales, the trend towards the electrification of motorised transport seems irreversible. In the coming quarters, German car manufacturers will also be launching numerous new electric models on the market and the expansion of the charging station network is also progressing rapidly. However, the original time horizons for a switch to e-mobility within 10 to 15 years, which came from politicians in particular, seem too ambitious and are likely to give way to more realistic timetables sooner or later.
However, with further advances in battery technology, the cost of buying and running these cars will continue to fall. If the overall costs are significantly lower than those of combustion vehicles and there is a sufficiently dense network of charging stations, the vast majority of consumers are likely to switch to electric cars.
The temporary slump in e-cars also has a positive side: it creates a window of opportunity to make the electricity grids fit for the future in good time. After all, the energy transition and power-hungry new applications (such as e-mobility, heat pumps or artificial intelligence) will require further huge investments in modernisation and capacity expansion.
Raiffeisen-SmartEnergy-ESG-Aktien
A smart investment in the energy transition
The term smart energy essentially encompasses innovative technologies and business models that aim to generate, transport and utilise energy more efficiently, cleanly and intelligently. This transformation of the energy sectorwill require huge investments totalling several thousand billion euros worldwide in the coming decades. On the one hand, it promises solutions to urgent environmental and climate problems and, on the other, it harbours considerable earnings potential.
The Raiffeisen-SmartEnergy-ESG-Aktien aims to utilise this potential and at the same time combine it with responsible investing. Naturally, there are also challenges and risks that need to be taken into account when investing.
The fund Raiffeisen-SmartEnergy-ESG-Aktien is managed on the basis of an active, fundamental and structured bottom-up approach.
The stock selection is based in particular on the GARP principle (GARP stands for growth at reasonable price), i.e. the focus is on good growth with a reasonable valuation. The companies must have a certain minimum ESG score.
The process of an ESG fund investment in smart energy depends on the investment guidelines of the respective product. In the case of Raiffeisen-SmartEnergy-ESG-Aktien, the guidelines clearly define – among many other things – what the minimum turnover of the company in the smart energy sector must be. The fund management therefore first screens the universe in terms of turnover in this area and then applies the in-house developed Raiffeisen ESG Indicator*.
Companies with nuclear power, coal, gas or oil production are not included in the portfolio (see sector policy “nuclear”). The final decision is made on the basis of a fundamental analysis, with the key business figures as the dominant factor.
Careful stock selection means that investments in fund Raiffeisen SmartEnergy ESG-Aktien leave a significantly lower carbon footprint than conventional energy funds.
*The Raiffeisen Kapitalanlage-Gesellschaft m.b.H. continually analyses companies and countries with the help of internal and external research providers. Together with an overall ESG assessment including an ESG risk assessment, the results of the sustainability research are converted into the so-called Raiffeisen ESG Indicator, which is based on a scale of 0 - 100. The assessment is made in consideration of the company’s respective branch of business.
The fund Raiffeisen-SmartEnergy-ESG-Aktien invests in the megatrend "energy transition" in a broad range of areas. Investments in this area are not a sure-fire success, but require careful selection, constant monitoring and, if necessary, adjustments by the fund management. There will also be winners and losers here and not every investment will ultimately fulfil the expectations of investors. Accordingly, the fund's positioning can also change at any time. The fundamental risks associated with equity investments naturally also apply to companies involved in renewable energies, more efficient energy utilisation and the technologies and components required for this. These include high price fluctuations and possible capital losses.
The fund Raiffeisen-SmartEnergy-ESG-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.