Scepticism provides an opportunity to invest in Asia sustainability

Asia is quickly catching up with the rest of the world on environmental and societal development, says Robeco.

Investors should invest in Asia’s sustainable future now and take advantage of ample investment opportunities, said Robeco at its sustainable investing media roundtable this week.

“There is a lot of scepticism about sustainability, because it is perceived as against the profit-driven model which Asian investors prefer. Also, Asia is where the biggest polluters are located, and the region is not famous for being the most responsible corporate citizen,” said Vicky Chi, portfolio manager of Robeco Sustainable Asian Stars Equities Strategy (pictured).

“But because of the scepticism, we see a tremendous opportunity for investors and we believe sustainability investing in Asia will become the mainstream,” she argued.

Although Asia is now leading other regions for carbon dioxide emissions, it is also transforming into the world’s biggest alternative energy producer, Robeco noted.

Fossil fuels made up 63% of China’s energy mix in 2016, according to data from the international energy agency, but it is estimated that at least 56% of the energy consumed in 2040 will be renewables.

“At a certain point in the coming two to three years, the cost of alternative energy will come down so much that it makes no more sense to invest in anything related to the coal industry,” said Chi.

“We are not going back to the stone age; our lifestyle and growing wealth will not go backwards in order to live sustainably, but instead move forward through technology-driven sustainable practices.”

When investing in China, Robeco believes renewables, electric vehicles, and energy storage technologies are the three sectors set to benefit when the world transitions to net-zero carbon emissions.

The world’s second-largest economy has seen a gradual exhaustion of hydropower and a slow take-up of nuclear power, but a significant development of wind and solar power, said Jie Lu, head of investments China.

More market-driven policies are supporting clean energy, which then lower the costs of wind and solar projects, and eventually increasing their proportion in the energy mix, he added.

Electric vehicles

The second key area to invest in is electric vehicles , which Robeco expects to be the biggest winner of the energy transition. China is already the biggest market for electric cars, and is likely to account for 20% of new car sales in 2025.

Lu added that the dominance of electric vehicles in China is not limited to passenger cars and has expanded to buses. The government has also allocated substantial funding to expand the infrastructure to boost the development of electric vehicles, such as building more charging stations.

Energy storage technologies such as batteries and hydrogen are expected to be in high demand during the energy transition. Asia — especially China — is dominating supply of the world’s deployed electric vehicle battery cells and is predicted to benefit further when demand for electric cars grows.

“These are long term structural themes for investors who are interested in exposure to Asia’s growth,” said Chi.

“People are still sceptical about some interesting opportunities, and they do not believe that the future will be very different from how it looks today. It is important to identify attractive and undervalued opportunities and we hope to find them before the market catches up.”