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Clemens Klein, fund manager of ERSTE WWF STOCK ENVIRONMENT, recently received a special honour. The renowned financial magazine Forbes lists him in 9th place among the best fund managers in the German-speaking region.
The ranking, which is compiled in cooperation with the fund analysis portal e-fundresearch.com, is based on performance data. The outperformance in the period from November 2017 to October 2022 compared to the average of the respective peer group is examined. Only mutual funds domiciled in Germany, Austria, or Switzerland are included in the evaluation.
We took this award as an opportunity to talk to Clemens Klein about the performance of ERSTE WWF STOCK ENVIRONMENT and its investment strategy. Among other things, he explains why 2022 was the “year of the gamechangers” and what this means for the megatrends in the environmental sector.
Your award highlights the positive development of ERSTE WWF STOCK ENVIRONMENT in the past years. What is the fund’s secret of success?
One of the secrets is certainly that we focus on very long-term trends. We try to imagine what the world will look like ten or 20 years from now, and we base our investments on that. The second factor is, I think, that we try to hold investments as long as possible. For example, we still have some companies in our portfolio that have been there unchanged since the start of the fund in 2001.
We also focus very strongly on small and young companies. With this sort of investments in particular, the analysis process can sometimes be very time-consuming, with little or no research coverage available at times. It is therefore all the more important to be in permanent contact with the management of these companies.
Talking about contact with companies: what does that include?
On the one hand, we are in regular contact with the companies in the portfolio – last year alone, we had more than 200 meetings. In addition, it is important for us to visit the companies ourselves to get an impression and see how things are developing there.
In 2022, for example, we visited a number of portfolio companies in Austria, Germany, and Norway. One trip also took us to Portugal, where we visited an exciting company in the green hydrogen sector. Alexander Weiss, the co-fund manager of ERSTE WWF STOCK ENVIRONMENT, reported on this in a blog post.
Close contact with management is also important to us for another reason: we want to convey the fact that we are available as a long-term partner even in difficult times and want to support the companies in their further growth. In my view, the intensive contact with younger companies that are still at the outset of their path has also contributed to the fund’s positive performance.
How do you discover new companies for the portfolio, and what companies from the various environmental themes do you regard as particularly interesting?
We always look at the entire value chain for any given investment theme while trying to avoid being invested in its most competitive areas. Rather, we want to get into the most attractive areas of the value chain. With regard to electromobility, for example, the issue of infrastructure is one we are looking at. We are not trying to find the next Tesla or predict who is most likely to succeed with their technology and approach, although there are certainly many exciting players in this area. However, regardless of who prevails, adequate levels of charging technology will be needed. All these e-cars need to be charged somewhere, so we are convinced that this sub-sector will continue to grow strongly. Again, there are some opportunities in the US and Europe.
Even though the performance of the 2022 Fund lagged behind previous years, a lot has happened in the field of renewable energies. What conclusion do you draw from this crucial year?
From our point of view, 2022 was a year of gamechangers for environmental themes. When Russia invaded Ukraine, it was clear that renewable energies were no longer an issue with only environmental or climate connotations. Above all, energy security and independence came to the fore. We responded to this by building up additional positions in renewable energies, energy storage, electromobility, and energy efficiency.
Another important factor was the political tailwind that started in 2022 on the back of the overall development. In the EU, a comprehensive programme was passed with RePower EU, and in the USA the Inflation Reduction Act was passed.
To what degree does this new environment in the energy sector affect the companies in the fund?
According to our estimates, about 75% of the companies in which we invest are positively affected by the political programmes in a direct fashion. The Inflation Reduction Act in the USA is de facto a climate law. A large part of the funds earmarked for the IRA go to environment, energy efficiency, electric mobility, … – all topics on which ERSTE WWF STOCK ENVIRONMENT focuses strongly.
For this reason, too, we are convinced that the areas in which the fund invests have a completely different growth dynamic than, for example, the broad market, especially in view of the current recession concerns. We do not see such worries at all in many of the companies in the fund. On the contrary, we continue to observe a positive momentum in sales and profits, particularly in the energy sector.
We also have to remember that solar energy, for example, only accounts for around 4% of the global electricity mix despite the recent strong growth. There is still a lot of growth potential. We expect this to be the dominant form of electricity generation within 20 to 30 years. But themes like wind power, hydrogen, energy storage, and electromobility will also be needed for the energy transition. This shows that we are not talking about cyclical themes, but about long-term megatrends that maintain their potential for a very long growth phase.
ERSTE WWF STOCK ENVINROMENT
The fund invests worldwide in companies from the environmental sector. The investment decision hinges on a measurable positive impact on the environment or society. The fund focuses on the following topics:
- Water treatment and supply
- Recycling and waste management
- Renewable energies and energy efficiency
Erste Asset Management and WWF (World Wide Fund for Nature) have been cooperating since October 2006. As part of this alliance, the fund management team is supported by an environmental advisory board initiated by the WWF. At the same time, Erste Asset Management donates part of its fund management fee to support WWF’s water, climate and nature conservation programmes.
Advantages for the investor:
- Broad diversification in companies of the environmental sector with little capital investment.
- Support for WWF’s environmental protection programs by Erste AM.
- Opportunities for attractive capital appreciation.
- The fund is suitable as an addition to an existing equity portfolio and is intended for long-term capital appreciation.
Risks to be considered:
- The price of the fund can fluctuate strongly (high volatility).
- Due to the investment in foreign currencies, the net asset value in Euro can be negatively impacted by currency fluctuations.
- Capital loss is possible.
- Risks that may be significant for the fund are in particular: credit and counterparty risk, liquidity risk, custody risk, derivative risk and operational risk. Comprehensive information on the risks of the fund can be found in the prospectus or the information for investors pursuant to § 21 AIFMG, section II, “Risk information”.
The fund employs an active investment policy and is not oriented towards a benchmark. The assets are selected on a discretionary basis and the scope of discretion of the management company is not limited.
For further information on the sustainable focus of ERSTE WWF STOCK ENVIRONMENT as well as on the disclosures in accordance with the Disclosure Regulation (Regulation (EU) 2019/2088) and the Taxonomy Regulation (Regulation (EU) 2020/852), please refer to the current Prospectus, section 12 and the Annex “Sustainability Principles”. In deciding to invest in ERSTE WWF STOCK ENVIRONMENT, consideration should be given to any characteristics or objectives of the ERSTE WWF STOCK ENVIRONMENT as described in the Fund Documents.
For a glossary of technical terms, please visit this link: Fund Glossary | Erste Asset Management
Prognoses are no reliable indicator for future performance.