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Thematics equity head: where to look for clean energy returns

Thematics equity head: where to look for clean energy returns

High tech suppliers in the onshore wind and solar photovoltaic (PV) power sectors potentially offer the best opportunities for investors as the world switches to cleaner energy.

That is according to NNIP’s head of thematic equities, Huub van der Riet, who runs several funds at the firm including the NN Global Equity Opportunities fund. The fund will be renamed the NN Global Equity Impact Opportunities fund, as the firm rebrands the fund with an ESG makeover.

Commenting on a new paper published by NNIP called ‘Clean energy: a look at the investment opportunities’, van der Riet said the growth in clean energy technologies has set the sector up for long-term growth.

‘Onshore wind and solar PV technologies have made rapid advances recently and are poised for exponential growth over the next three decades.

'They stand to benefit from growing policy support for a transition to cleaner energy from the international community in response to the threat of climate change.’

However, van der Riet highlighted that while onshore wind and solar PV may offer the best possible investment avenues, investing in the space takes work from investors.

‘Investing in companies that are part of the global value chain of clean energy technologies requires careful consideration of a number of factors.

‘Investors need to understand the evolution of technologies, their cost competitiveness, the need for regulatory support and the technical challenges related to transmission and geographic suitability.’

Quality will benefit

The NNIP report states that cost reductions have not been driven by a reduction in turbine prices - but through technological development, van der Riet said high-quality companies in these sectors have also benefitted from innovations.

‘They have high barriers to entry and economies of scale which can drive healthy double-digit returns on investment.

‘Other forms of clean technologies such as geothermal, biomass and carbon capture, which involves collecting CO2 emitted by fossil fuel generation and storing it underground, are either too limited in their scope because of resource availability or are prohibitively expensive.’

The report also pointed to solar cell power as a major growth area in clean energy, due to the unique offerings that help increase efficiency and drive down costs.

Despite this van der Riet said that going forward, storage of energy represents a big challenge.

‘Technological innovation will be key and eventually, there will be manufacturers that do offer solutions and when they do, they will become very interesting.’

The NN (L) Global Equity Opportunities fund returned 1.66% in US dollar terms, over the three years to the end of February 2017. This compares with a 19.95% rise by its Citywire-assigned benchmark, the MSCI World Growth TR USD, over the same time period.

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