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Measuring the impact of investments remains a main challenge for sustainable finance professionals and, together with Climate Change, an overarching theme at TBLI. Sixteen related workshops offer ...

Measuring the impact of investments remains a main challenge for sustainable finance professionals and, together with Climate Change, an overarching theme at TBLI. Sixteen related workshops offer debate on ESG and Impact Investing trends, private equity, portfolio strategy, food production, emerging markets, sustainable energy or philanthropy investing.

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    Monz ilona Monz ilona Presentation Transcript

    • Investing in Energy Efficiency & Fuel Free Energies ... … The Perspective of a public equity fund manager Dr. Ilona Monz 14. November 2013 Performance creates trust
    • Page 2 Introduction Vontobel Trend Team  Invest in equity of publicly traded companies that play an active role in shaping a sustainable energy future, globally  Team with 5 members constituted 2008  Fund in focus today: New Power Fund AUM  CHF ~500 million Risk/Reward Liquidity Venture Capital Private Equity Listed equity Project Finance
    • Page 3 Agenda  Capturing the Energy Growth Opportunity  Growth & Performance Drivers  Blue Sky Scenario?
    • Page 4 Capturing the Energy Growth Opportunity Strong fundamental growth drivers … Demand for clean energy continues to grow driven by rising populations, industrialisation of emerging markets, environmental trends Demand for CLEAN ENERGY GROWS MORE than GDP > 50% of all power ever generated has been consumed in the past 15 years
    • Page 5 Capturing the Energy Growth Opportunity … but theme focus has evolved over time … Key issues Affordabilit y Acceptance by Society: Clean Supply, Climate Change Oil price Secure Supply: Fossil Resources are finite & located in politically unstable regions Growing Demand for Energy Key events Climate change science Wind take off Carbon Trading PV acceleration Kyoto commitments Oil crisis … 1970 Chernobyl 1980 1990 Financial Crisis 2000 2010
    • Page 6 Capturing the Energy Growth Opportunity ... resulting in energy policy framed by three key issues. Affordability Acceptance by Society Complexity but also Opportunity Secure Supply of today‘s Energy Policy
    • Page 7 Capturing the Energy Growth Opportunity Four core areas for investment Secure Affordable Acceptable Improve Efficiency of Supply Energy Substitutes 2 1 Alternative Energies Natural Gas Markets ‘Cleaner’ fossil fuel Solar Wind Transition Fuel Growing # of applications Hydro Wave/Tidal/Othe r Improve Efficiency of Consumption 3 Efficient Generation & Transmission  Efficient power generation Improved network management Critical power applications 4 Demand Side Energy Savings  End user energy management e.g. smart metering Automation, engine and building efficiency Low emission transportation
    • Page 8 Capturing the Energy Growth Opportunity Absolute returns of New Power themes Picking the right stocks Picking the right subsegment
    • Page 9 Agenda  Capturing the Energy Growth Opportunity  Growth & Performance Drivers  Blue Sky Scenario?
    • Page 10 Growth and Performance Drivers Main Return Driver – Outlook Q4-2013 Sub-segment Natural Gas Markets Efficient Generation & Transmission Demand Side Energy Savings Alternative Energies Return on Investment - Drivers* GDP growth Commodity/ Power Price Equipment Price Interest rate Construction Cycle Regulation** * applicable at different degrees; ** different types: incentive, feed-in, environmental, carbon, efficiency standards Outlook
    • Growth and Performance Drivers … Alternative Energy economics start to work Page 11 Levelised Cost of Electricity Generation Alternative Energy improving competitiveness Equipment price down No fuel cost exposure US$/ MW h 350 300 250 200 150 100 50 0 PV - C rystalline Silicon Biomass Incineration C Fired Plant oal Source: Bloomberg New Energy Finance, July 2013 Q 2-2013 Natural G C G as C T Q 2-2010 W -O ind ffshore W -O ind nshore
    • Page 12 Growth and Performance Drivers Energy Efficiency - good underlying growth concealed Producers: Consumers:  Tightening energy efficiency - Mandates standards e.g. building efficiency  Awareness standards - Phase-outs e.g. incandescent light bulbs  Innovation - Leaders drive technological progress - Differentiation, improving competitive positioning and gaining market share Rising energy costs Environmental consciousness Product labelling  Economics - Technological advances driving cost reductions - Economically viable today without subsidies => short paybacks - Life-cycle cost gaining importance
    • Page 13 Agenda  Capturing the Energy Growth Opportunity  Growth & Performance Drivers  Blue Sky Scenario?
    • Page 14 Blue Sky Scenario? Fundamentally – Risk and Opportunity  Important support from subsidy Expect Energy Market Reform: programmes China, Europe, US, Japan, Germany …. Low Visibility in fragmented, high growth markets like solar, wind, LED…  Price stabilisation confirmed?  Overcapacities filled? Inventories reduced? Fragile financial status for several solar stocks     Macro Economic environment … restrained tone  Fed tapering decision?  GDP growth outlook?  Forex, Commodity price outlook? Earnings turn around? Capital Increases? Bankruptcies? Chinese Banking situation? Alternative Energy + Energy Efficiency qualifying as: Affordable, Acceptable, Secure
    • Page 15 Blue Sky Scenario? Equity Funds – Risk and Opportunity Attractive Opportunity  Investment in high growth theme  Regional and Segmental Diversification  Liquidity Risk / Reward Relationship High reward High growth Divergence of expectations High risk Growth ≠ Return
    • Page 16 Take Aways Energy Growth Opportunity  Clean Energy Demand outgrows GDP  Acceptable, affordable and secure energy policy offers investment opportunities Growth and Performance Drivers  Energy Policy / Regulation  Commodity / Power Price  Equipment Costs Where does the music play?  All four Sub-themes healthy outlook - Natural Gas - Alternative Energy - Power Generation and Transmission - Demand Side Energy Saving  Balancing Risk/Reward
    • Page 17 Appendix
    • Page 18 Sector Weightings & Top Ten Positions Portfolio as of 31 October 2013 Company Name Sectors Quanta Services Power Generation & Transmission US 3.7 Schneider Electric Demand Side Energy Savings FR 3.5 AMETEK Demand Side Energy Savings US 3.3 Prysmian Power Generation & Transmission IT 3.3 Terna Power Generation & Transmission IT 3.2 Continental Demand Side Energy Savings DE 3.2 NextEra Energy Alternative Energy US 3.0 Roper Industries Demand Side Energy Savings US 3.0 Vestas Wind Systems Alternative Energy DK 2.8 Power Integrations Demand Side Energy Savings US 2.6 Total Top Ten Source: Vontobel Asset Management Country Weight (in %) 31.4
    • Page 19 Country and sector exposures Portfolio as of 31 October 2013 Source: Vontobel Asset Management
    • Page 20 Performance B share class* Fund vs. benchmark (since inception) YTD 1 Year 3 Year (annualised) Since inception (annualised) Vontobel Fund – New Power 20.81% 24.32% 4.03% 0.39% MSCI World Index 18.20% 19.87% 12.72% 2.55% As of 31 October 2013 Source: Vontobel Asset Management * Net of fees
    • Page 21 Fund Flows by Investment Class Solar about 2x size of Wind Investments Solar Investments Source: Bloomberg New Energy Finance Wind Investments
    • Page 22 Energy Efficiency …Waste not, want not
    • Page 23 German Energy Policy: Affordable – Acceptable - Secure Power mix, 2012 Source: Bundesministerium für Umwelt, 03/2013 … by source of power 1990 - 2012
    • Page 24 German Energy Policy …Germany has one of the highest energy tariffs globally Energy tariffs in a global comparison Energy tariffs in US$ per MWh, 2012 Forecast change in energy tariffs … Energy tariffs in GB£ per MWh in 2010 prices Power (42%) and Industry (29%) are the two biggest consumers of energy – ahead of Transportation (18%)
    • Page 25 German Energy Policy Affordable – Acceptable – Secure … private households Power Price private HH – Germany Energy costs (Power, Heat, Transport)  11% disposable income Ø private HH (7.6% 1998)  16% disp. income low income HH (11% 1998) Power Price private HH - Europe  Power Prices on an uptrend despite coal and gas 20% below 2007 levels
    • Page 26 Global Energy Supply … Affordable – Acceptable - Secure Renewables: lion share investments… … still only small fraction in total Global Investment (US$ bn, 2012) Share of energy consumption by fuel and region
    • Carbon Trading (EU‘s Emission Trading System – ETS): Price collapse in Phase III (2013-2020) EUA Oversupply Price Response Drivers  GDP growth  Renewable capacity Since June 2008  EUA down from EUR 26.6 to EUR 4  CER down from EUR 19.2 to EUR 0.40 Oversupply of Carbon Certificates led to EU Allowances (EUA) price drop  in Phase I + II however EUR 100bn windfall profits for European Utilities Page 27
    • Page 28 Carbon Emissions … CCS technologies are theoretically cost competitive
    • Page 29 Disclaimer Important legal notice: This document is for information purposes only and nothing contained in this document should constitute a solicitation, or offer, or recommendation, to buy or sell any investment instruments, to effect any transactions, or to conclude any legal act of any kind whatsoever. Prospective investors must rely on their own examination of the legal, taxation, financial and other consequences of an investment in the funds, including the merits of investing and the risks involved. Prospective investors should not treat the contents of this document as advice relating to legal, taxation or investment matters. Before entering into an agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment advisers as to its suitability for you. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Past performance is not a guide to current or future performance. Performance data does not take account of commission or costs charged when units are issued or redeemed. An investment in a sub-fund of the Vontobel Fund carries various risks which are explained in the sales prospectus. In particular, we wish to draw your attention to the following risks: Investments in the securities of emerging-market countries may exhibit considerable price volatility and – in addition to the unpredictable social, political and economic environment – may also be subject to general operating and regulatory conditions that differ from the standards commonly found in industrialised countries. The currencies of emerging-market countries may exhibit wider fluctuations. Investments in riskier, higher-yielding bonds are generally considered to be more speculative in nature. These bonds carry a higher credit risk and their prices are more volatile than bonds with superior credit ratings. There is also a greater risk of losing the original investment and the associated income payments. Commodity investments can be very volatile and are prone to sudden swings over the long run. Governments may at times intervene directly in certain commodity markets. These interventions can cause significant swings in the prices of different commodities. Investments in derivatives are often exposed to the risks associated with the underlying markets or financial instruments, as well as issuer risks. Derivatives tend to carry more risk than direct investments. Although Vontobel believes that the information provided in this document is based on reliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completeness of the information contained in this document. Vontobel explicitly reserves the right to change, amend or delete parts of this document or the document as a whole without further notice. All herein publicized information, particularly share prices, calculation data or forecasts are based on the best knowledge and/or the market estimation as at the date indicated in the presentation. This document may not be reproduced, redistributed or republished for any purpose without the written permission of Vontobel. The Fund and its subfunds are included in the register of Netherland's Authority for the Financial Markets as mentioned in article 1:107 of the Financial Markets Supervision Act (Wet op het financiële toezicht). In Spain, funds authorized for distribution are recorded in the register of foreign collective investment companies maintained by the Spanish CNMV (under number 280). The funds authorized for distribution in the United Kingdom can be viewed in the FCA register under the Scheme Reference Number 466623. Please refer for more information on the Vontobel Fund, a regulated collective investment scheme under Luxemburg law, to the latest prospectus, annual and semi-annual reports as well as the key investor information documents (KIID). Interested parties may obtain these documents, as well as the list of changes in portfolio during the year and the list of benchmarks free of charge from the representative in Switzerland: Vontobel Fonds Services AG, Gotthardstrasse 43, 8022 Zurich, the paying agent in Switzerland: Bank Vontobel AG, Gotthardstrasse 43, 8022 Zurich, the paying agent in Austria: Erste Bank der oesterreichischen Sparkassen AG, Graben 21, A-1010 Vienna, the paying agent in Germany: B. Metzler seel. Sohn & Co. KGaA, Grosse Gallusstrasse 18, 60311 Frankfurt/Main, from the authorized distribution agencies, the addresses mentioned below and from the offices of the fund at 69, route d’Esch, L-1470 Luxembourg. They may also download these documents from our website at funds.vontobel.com. Further information for UK: This communication is directed only at recipients who are eligible counterparties or professional clients, as defined in the Glossary to the Financial Conduct Authority’s Handbook of Rules and Guidance. Any investment or service to which this communication relates is only available to and will only be engaged in with such persons. Any other persons who receive this communication should not rely on or act upon this communication. This information was approved by Vontobel Europe SA, London Branch, which has its registered office at Third Floor, 22 Sackville Street, London W1S 3DN and is authorized by the Commission de Surveillance du Secteur Financier (CSSF) and subject to limited regulation by the Financial Conduct Authority (FCA). Details about the extent of regulation by the FCA are available from Vontobel Europe SA, London Branch, on request. Further information for Singapore and Hong Kong: The Fund and its subfunds are not available to retail investors in Singapore or Hong Kong. Selected sub-funds of the Fund are currently recognized as restricted schemes by the Monetary Authority of Singapore. These sub-funds may only be offered to certain prescribed persons on certain conditions as provided in the Securities and Futures Act, Chapter 289 of Singapore. The Fund is not authorised by the Securities and Futures Commission of Hong Kong. It may only be offered to those investors qualifying as professional investors under the Securities and Futures Ordinance. The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution and if you are in any doubt about any of the contents of this document, you should obtain independent professional advice.