Why invest in renewable energies?

Flooding, forest fires, mass migration, and the destruction of biodiversity are only a few of the consequences of global warming that we are already clearly seeing the effects of today. In order to keep global warming below the required level of 2 degrees Celsius up until the year 2100, only 600 more gigatonnes of greenhouse gas can be emitted worldwide. But the current level of consumption is so high that our reserves will already be exhausted in a few years. The energy sector generates two-thirds of the greenhouse gases. Therefore, we have to reduce the emissions in this field as quickly as possible. But this can only be achieved if we consistently press ahead with the energy transition. To this end, a great deal of money has to be directed into renewable energy sources (regardless of geopolitical necessities). Future-oriented energy generation and production and responsible energy management are the order of the day.

Companies characterised by growth opportunities

Investors can support the fight against global warming with targeted ESG investments*, i.e. investments on the basis of sustainable criteria. Raiffeisen-SmartEnergy-ESG-Aktien, specifically invests in companies from the segments of renewable energy, energy distribution, energy efficiency, energy management, energy storage, and transport. The fund focuses on the low-carbon economy. Many of the relevant industries are characterised by growth opportunities, which in turn increases the prospects of attractive returns. This applies to hydrogen – both as an alternative fuel and as long-term storage for wind and solar energy – as well as more efficient and cost-effective batteries for electric vehicles. Solar and wind energy will become even more significant with the increasing phaseout of coal-fired power plants. Companies that operate “intelligent” power networks or supply them with software (e.g. smart metering) are also very attractive for investors.

At the same time, the ambitious climate targets – such as the Paris Agreement or the EU’s Green Deal – can only be achieved if investments in increasing the energy efficiency of buildings are expanded significantly. For example, 35% of the buildings in the EU are over 50 years old and 75% are considered energy inefficient*. In the course of the EU’s renovation initiative, an additional EUR 275 billion in investments are to be made annually in this area up until 2030. Industrial and IT companies that are active in fields such as thermal insulation or electrical and digital building infrastructure can profit from this.

Europe leads the way in terms of investable names

Europe is especially dedicated when it comes to renewable energy, and Scandinavia is clearly leading the pack, because a great deal of technological progress is being made in these countries in particular. On the whole, it is impressive how much renewable electricity is now being generated in European countries. And there are also many, many companies operating in this field in the USA. Asia is still a bit behind at the moment, but it is safe to assume that this will change in the coming years and that the Asian markets will also offer attractive investment opportunities. The air pollution alone will force many countries to take action.

ESG investment in practice

How an ESG fund’s investment process is executed in the smart energy segment depends on the investment guidelines of the given product. In the case of Raiffeisen-SmartEnergy-ESG-Aktien, these guidelines clearly define how high the company’s minimum revenue in the field of smart energy has to be – along with many other aspects. Therefore, the fund management first screens the universe with regard to the companies’ revenues in this segment and then calculates the Raiffeisen ESG indicator* in-house. Companies that are active in nuclear energy or coal, gas, or oil production are not added to the portfolio. The final decision is made on the basis of a fundamental analysis in which the key business indicators serve as the dominant factor.

The careful selection of assets ensures that investments in Raiffeisen-SmartEnergy-ESG-Aktien leave behind a much smaller carbon footprint compared to conventional energy funds.

Investments in funds involve higher risks, up to and including loss of capital.

The fund exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and loss of capital cannot be ruled out.

*) Explanations

• ESG stands for environmental (E), social (S), and good corporate governance (G.)

• Source: European Commission

• Raiffeisen Kapitalanlage-Gesellschaft m.b.H. analyses companies and governments on an ongoing basis using internal and external research sources. The results of this sustainability research are combined with a comprehensive ESG rating, including an ESG risk assessment, to create the so-called Raiffeisen ESG indicator. The Raiffeisen ESG indicator is measured on a scale from 0 to 100. The assessment also takes into account the relevant sector.