July-August 2010 Issue 82
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Looking climatechange change Looking atatclimate from broaderperspective perspective from aa broader ThemaTic or climaTe change funds can provide a wide range of opporTuniTies across ThemaTic or climaTe change funds can provide wide range of opporTuniTies across a number of indusTries, and are well suiTedaTo high neT worTh privaTe clienTs a number of indusTries, and are well suiTed To high neT worTh privaTe clienTs One drawback with renewable energy lot of research into coming up with funds is therenewable sector´s relatively to wash lower One drawback with energy small lot ofways research intoclothes comingatup with universe of eligible investment which results in an funds is the sector´s relatively small waystemperatures, to wash clothes at lower Of the 600 SRI funds enormouswhich energyresults savingin and universe opportunities. of eligible investment temperatures, anreduced available, around can be costs for households. Some of them opportunities. Of the 600 100 SRI funds enormous energy saving and reduced ascan thematic involved in the substitution of available,categorised around 100 be or climate costsare for also households. Some of them change funds. Those that understand palm oil fromin new using categorised as thematic or climate are also involved theplantations substitution of a that climate involves a number of plants,using so reducing change funds. Thosechange that understand palmdifferent oil from species new plantations a of issues beyond renewables can deforestation in Asia. that climate change involves a number different species of plants, so reducing access a much wider opportunity set Another example is the rail of issues beyond renewables can deforestation in Asia. across a range of industries. Eligibility transportation sector, which is access a much wider opportunity set Another example is the rail is more broadly based on whether benefiting from public policies to across a range of industries. Eligibility transportation sector, which is companies are taking steps not only to incentivise rail transport for is more broadly based on whether benefiting from public policies to mitigate carbon emissions but also to passengers, crops and raw materials. companies are taking steps not only to rail transport for “climate change incentivise provide solution to the impact of About one third of the stimulus mitigate climate carbon change—adaptation emissions but also to passengers, crops and raw materials. solutions. efforts made by the US, UK, European, has nOt really “climate change provide solution to the impact of About one and thirdBrazilian of the stimulus For some funds, the definitions are Chinese governments to been factOred climate change—adaptation solutions. efforts made by theeconomies US, UK, European, so wide that they include companieshas nOt really rekindle their will be spent For some the definitions Chinese andgreening Brazilian intO the market” thatfunds, incorporate the impactare of extreme on the ofgovernments the economy,to been factOred so wide that theyconditions include companies rekindle their economies will bewill spent weather into their business including mass transit. This open Carlos Joly that incorporate impact extreme inintO the market” on the of theineconomy, models, the opening upof opportunities upgreening opportunities locomotives and weather conditions into their business transit.while This at willthe open everything from consumer goods Carlosbombed othermass equipment, same Joly out when the bubble bursts.”including models, opening uptoopportunities in up opportunities in locomotives and companies insurance companies “The approach we’ve taken at Natixis time improving energy efficiency. everything from out Management when the bubble that are consumer modifying goods their products tobombed Asset is to bursts.” look at climate other equipment, while at the portfolio same Suzanne Senellart, deal environmental change. fromwe’ve a broader Impactefficiency. Funds Climate companies towith insurance companies “Thechange approach takenperspective,” at Natixis he time manager improvingofenergy Funds with a broad brieftocan select explains. “Weislook conceptually at ChangeSenellart, at Natixis Asset Management, that are modifying their products Asset Management to look at climate Suzanne the portfolio 30 or more sub-sectors, givingchange a three based on three forms also of highlights the railClimate sector, deal withfrom environmental change. fromissues, a broader perspective,” he ofmanager Impact Funds diversification traditional response to climate change. explaining how it offers better prices Funds broader with a broad brief canthan select explains. “We look conceptually atThese areChange at Natixis Asset Management, alternative energy andgiving sustainability mitigation, which is anything and improved footprint than from 30 or more sub-sectors, a three issues, based on three forms to of do with also highlights the carbon rail sector, portfolios. reducing greenhouse transportation by road, while the broader diversification than traditional response to climate change.gases; These are explaining how it offers better prices “Climate Change has not really been adaptation, how we can adapt to the presence of public funds is not alternative energy and sustainability mitigation, which is anything to do with and improved carbon footprint thanthe only factored into the market and this increasing frequency way governments influencing the portfolios. reducing greenhouse gases;of extreme transportation by road,are while the provides interesting opportunities weather conditions such as floods and SRI sector. “Climate Change has not really been adaptation, how we can adapt to the presence of public funds is not the only across a range of industries and droughts for instance; and better “One of the advantages is that factored into the market and this increasing frequency of extreme way governments are influencing the sectors,” says Carlos Joly, who heads management of natural resources, such change and developments are often provides interesting opportunities weather conditions such as floods and SRI sector. the Climate Change Scientific as looking after soil and water.” driven by regulation and government across a range of industries and droughts for instance; and better “One of the advantages is that Committee for Natixis Asset This latter approach opens up a fund incentives,” says Suzanne Senellart. sectors,” says Carlos Joly, who heads management of natural resources, such change and developments are often Management. to investing in consumer goods “For example in the lighting business, the Climate Change Scientific as looking after soil and water.” driven by regulation and government “Society at large recognises the companies which have a conscious the progressive switch is becoming Committee for Natixis Assetweather events, butThis policy latter approach opens up a fund incentives,” saysfrom Suzanne impact of extreme of producing products that make mandatory, 2012 Senellart. in the European Management. in consumer goods carbon “For example infor theChinese lightingpublic business, it has been priced into only a narrowto investing a contribution to reducing Union and sector. “Society at large recognises the companies which have a conscious the progressive switch is becoming segment of the economy, largely only footprint. We will all have to change existing impact ofthe extreme weather events, but policy of producing thathousehold make mandatory, 2012 in the European alternative energy sector, such as An exampleproducts is packaged lightingfrom progressively – there is no it has been priced into only narrow to reducing Unionchoice and for Chinese publicFrom sector. solar companies anda wind turbine a contribution goods, which have acarbon strong R&D in medium-term. the segmentcompanies. of the economy, largely with only thesefootprint. all have to changeprospective, existing The problem pipeline. Consumer goods companiesWe will automotive industry the alternative such asfew An example is packaged household progressively theretoiselectric no cars, sectorsenergy is theresector, are relatively are increasingly involved in consciouslighting people will start to–shift solar companies and wind turbine goods,policy whichofhave a strong R&D that make choice in medium-term. publicly-listed names, and as a producing products with a direct subsidyFrom to thethe consumer, consequence these arethese either pricedpipeline. at a contribution to reducing carbon this new policy encourages companies. The problem with Consumer goods companies automotive industry prospective,the car multiples which few results in a are increasingly footprint. involved The most in engaged companies producers car research sectors ishigh there are relatively conscious people will starttotonew-energy shift to electric cars, bubblenames, phenomenon, into climate change issues, Chinasubsidy and in Europeans countries. “ publicly-listed and as aor they get policy of producing products that have makeput awith aindirect to the consumer, consequence these are either priced at a contribution to reducing carbon this new policy encourages the car high multiples which results in a footprint. The most engaged companies producers to new-energy car research bubble phenomenon, or they get into climate change issues, have put a in China and in Europeans countries. “
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July-August 2010 Issue 82
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Consultants say the efficiency gains made by improving sustainability are underestimated. Climate change factors can influence a business’ reputation, costs, revenue, profitability and competitive positioning. For the vast majority of industry types, research depicts an actual cost benefit to a business for improving its efficiency in terms of reducing greenhouse gas emissions. This is something that corporate executives, on one level at least, understand and appreciate. Climate change factors provide strong reasons for superior investment performance precisely because the process behind selecting these companies is based on finding long term trends in society and its attitudes to the environment. There is a question mark over how many companies actively seek opportunities to invest in sustainability or embed it in their business practices. Mr Joly says many industrials are ahead of the game, but that the financial world as a whole is only at the very beginning of a period where understanding will grow. “There is more understanding on the industrial side but not in financial markets which lag behind,” he says. “For all of the creativity the financial markets have, it is directed in the wrong areas. Large parts of the market are very conservative and that goes against being able to implement forward-looking policies. The impact on earnings and growth in companies is here now and it will increase over the next three years. Leading the way in the take up of climate change funds are public pension schemes and wealth funds with long horizons, while high net worth clients are also quite proactive, particularly on the private equity side. There is a belief among leading fund players that the broader thematic funds are well suited to high net worth
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not as volatile as the more specialised single sector funds. The global bias to most broad climate funds increases the opportunity set and allows managers the freedom to switch between markets. ThemaTic or climaTe chang Most have substantial holdings in a number of indusTries, and emerging markets as developing nations gear up to actively promoting green, clean industries in the One drawback with renewable energy knowledge they need renewables to funds is the sector´s relatively small secure the sustainability of their universe of eligible investment growth. China for example is starting to opportunities. Of the 600 SRI funds promote electric cars with a direct available, around 100 can be “One Of the subsidy to the consumer. Thiscategorised new as thematic or climate policy should encourage car producers advantages is that change funds. Those that understand to conduct more research intothat thisclimate change involves a number change and sector. of issues beyond renewables can develOpments are The Natixis Asset Management fund access a much wider opportunity set is 19 per cent invested in emerging across a range of industries. Eligibility Often driven by economies with room to manoeuvre is moreto broadly based on whether regulatiOn and 25 per cent. “ The fund is alsocompanies invested are taking steps not only to gOvernment carbon emissions but also to up to 22 per cent in the North mitigate American provide to the impact of markets,” says Suzanne Senellart (as solution of incentives” 05/31/2010). “These make forclimate a very change—adaptation solutions. Suzanne Senellart For some funds, the definitions are different story.” There Natixis Asset so wide clients. For man institutional investors, Management is focused on large and that they include companies that the impact of extreme broader thematic funds can be strange medium caps technology leaders, incorporate for weather conditions into their business animals because they are not sure example video conferencing, and models, opening up opportunities in exactly where to put them in their instrumentation to capture resources everything from consumer goods portfolios. They do not appear to sit such as water and electricity meters companies to insurance companies naturally in any one geography or and smart reader companies. that are modifying their products to sector. Private clients, however, do not Many of the funds also have a deal with environmental change. have these constraints. general bias to smaller capitalisations, Funds with a broad brief can select This also makes their performance which can present challenges in from 30 or more sub-sectors, giving a hard to evaluate. Comparing funds can liquidity and the disclosure ofbroader diversification than traditional be difficult because fund houses must information, but can offer greater alternative energy and sustainability evaluate companies making the wind appreciation prospects. Around 500 portfolios. turbines and solar panels alongside companies qualify for the Impact“Climate Funds Change has not really been companies with credible policies to Climate Change universe, andfactored their into the market and this reduce their own emissions. On the average capitalisation is less than provides interesting opportunities whole, thematic and environmental $10bn, half that of the MSCI World across a range of industries and funds outperform mainstream indices Index at $20bn. sectors,” says Carlos Joly, who heads but there is certainly a wide disparity theSRI Climate Change Scientific In recent months, demand for between the best and worst funds in funds has remained flat, partlyCommittee because for Natixis Asset this sector. Over one year, the top the Copenhagen meeting last Management. “Society at large recognises the performers are up by around 30 per December produced little concrete cent, while the laggards have progress. However coverage ofimpact the BPof extreme weather events, but it hasback been priced into only a narrow plummeted by 15 per cent. spill has put environmental issues segment of the economy, largely only The broader global climate funds are in the headlines. the alternative energy sector, such as solar companies and wind turbine A pioneer in SRI with 25 years of experience, Natixis Asset Management is the European expert of Natixis Global Asset companies. The problem with these Management with around E309bn assets under management sectors is there are relatively few (Source: Natixis Asset Management - data as of 31/03/2010) publicly-listed names, and as a consequence these are either priced at The fund mentioned herein is a sub-fund of Impact Funds which is organised as an investment company with variable capital under the laws of the Grand Duchy of Luxembourg and is authorised by the financial regulator (the CSSF) as a UCITS. Natixis Global Associates S.A. is the management company of the fund. Natixis Asset Management, thehigh investment multiples which results in a manager of the fund, is a subsidiary of Natixis Global Asset Management and is a French asset manager authorised by the Autorité des Marchés Financiers (Code 1200009, Agreement No. GP90009) and licensed to provide investment management services in the EU. Natixis Global Associates is the global distribution organization of Natixis Globalphenomenon, or they get bubble Asset Management, the holding company of a diverse line-up of specialised investment management and distribution entities worldwide. This article is for information purposes only and does not constitute a recommendation or an offer to buy or to sell any security, or an offer of services. Distribution of this document may be restricted in certain countries. The fund is not authorised for sale in all jurisdictions and its offering and sale may be limited by the local regulator to certain types of investors. Please ask your financial advisor if you have any questions. It is the responsibility of your financial advisor to ensure that the offering and sale of fund shares complies with the relevant national law. The fund may not be offered or sold in any country or jurisdiction where it would be unlawful to offer or sell the fund. This is not a prospectus and does not constitute an offering of shares. Please read the prospectus carefully before investing.
More information on www.am.natixis.com/climatechan