Ninety One Asset Management’s Deirdre Cooper, co-manager of the Global Environment Fund, has told ESG Clarity the regulatory efforts seen in pandemic recovery plans have encouraging, but she is keeping a close eye on further changes
The manager, who joined what was then called Investec Asset Management in September 2018, said she initially thought the Covid-19 crisis would mean governments would pause plans to adopt greener policies, but has welcomed ESG-friendly plans being incorporated into strategies to rebuild economies and communities, something that has been widely coined ‘build back better’.
“We have genuinely been surprised by the regulatory support so far.
“If you had asked me in March, I would have said things will be paused, but the acceleration in regulation has been extremely positive in the EU, France and Germany.”
In May, the European Commission (EC) unveiled a coronavirus recovery plan, which included €750bn Next Generation EU fund to sharpen the region’s focus on moving to a sustainable economy.
“This highlights the European Union has put accelerating the shift towards a lower-carbon, more sustainable economy at the heart of its post-pandemic stimulus strategy,” Cooper said.
Looking forward, Cooper anticipated there is likely to be more to come; regulatory change, technological change and consumer behaviour change.
“The US elections are very important from a decarbonisation perspective. A regime change would be extremely positive for this part of the market.
“And, consumer behaviour will be interesting to follow.”
The Global Environment Fund, which is co-managed with Graeme Baker, consists of 25 holdings, a concentrated portfolio, which Cooper said is imperative in order to engage with each company.
“Through the crisis we spoke to every company in the portfolio. Engagement is important to have that intentionality,” she said.
Some of the best performers during the first half of the year were US utility energy company NexTera and Wuxi Lead Intelligence, a Chinese market leader in capital equipment to make batteries for electric vehicles.
Cooper said NexTera is the largest owner of wind and solar in the US, owns the cleanest utility in Florida and has given visibility to pay a dividend through to 2022. Meanwhile, Wuxi Lead Intelligence has won an order to supply VolksWagen and revenues have been growing well over 20% per annum.
“This is a China A-share at the beginning of its growth,” she commented.
Cooper also said the team had introduced three new names to the portfolio amid the stock market falls, all of which are companies that they had been researching for some time. These are:
- NXP Semiconductor – American-Dutch semiconductor company
- Croda – UK listed leader in bio alternatives for personal care value chain
- IPG Photonics – US listed company producing lasers for industrial automation process
Cooper and co-manager Baker also highlighted the world still has a huge task ahead to transition from today’s clearly unsustainable economy to a world that runs with cleaner energy and transport, more efficient industrial production and has an increased number of energy-efficient buildings.
The pair re-emphasizes the investment opportunity in decarbonisation, saying “Covid-19 has created opportunities and challenges for investors aiming to tap into this trend”.
They commented: “The products and services of select companies will be crucial in enabling that transition – providing those businesses, we believe, with a structural growth tailwind for years. That may prove a lifeline for investors in a growth-challenged world.”
Here they outline nine issues for climate-aware investors to watch in a post-pandemic world:
- Decarbonisation remains urgent, and a driver of structural growth
- The stars may be aligned for a(nother) ‘growth’ moment
- Be sure to tap decarbonisation’s diversification potential
- Companies are stronger this time around, but stay focused
- Keep an eye on the regulatory drivers of decarbonisation
- Europe’s post-pandemic recovery plan will spur decarbonisation sectors
- Wildcard US is even less predictable
- China is another policy question; the answer could be ‘interest rates’
- Trends in clean-energy economics continue, but competitive dynamics may change