Too many Managers over invested in the past and under invested in the future - Energy Mega Trends
News release, 29 January 2020
With global demand for clean, renewable energy accelerating hard and Climate Change mitigation to the fore, Dublin-based manager sets sights on five multi-decade Megatrends
Energy is a key resource which, with circa 2bn more people predicted to be on the planet by 2050¹, will need significant investment if we are to provide adequate provision for our burgeoning global population. Allied to the expected surge in demand there is heightened awareness of the pressing need to move away from fossil fuel energy sources as part of the drive to reduce CO2 and mitigate against the ever-increasing impact of climate change on the planet. Too many global asset owners continue to be under invested in clean energy companies – they are over invested in the past and under invested in the future.
Specialist asset management boutique KBI Global Investors (‘KBIGI’) sees tremendous potential in the opportunities presented by companies providing low carbon solutions to the world’s accelerating demand for clean, renewable energy – the KBIGI Energy Solutions Strategy giving investors an ideal way to address this imbalance and access the opportunity for excess alpha. The Dublin-based manager highlights five multi-decade ‘Megatrends’, in evidence for many years, but which it believes are today more pertinent than ever.
Five long term, indisputable Megatrends
• Inadequate supply of clean and renewable energy, critical for tackling climate change: oil and gas reserves are due to run out within the next 50 years²
• Increasing demand for clean, renewable energy driven by population growth, industrialisation and urbanisation: in 41 countries, less than 50% of the population has access to electricity³
• Increasing regulation and government support: in addition to increased regulation and supportive government policies, global corporates are transitioning to a low carbon and energy-efficient economy with pro-active energy strategies
• Increasing investment in energy infrastructure: an estimated $22trn⁴ is needed to address urgent global requirements
• Increasing investment in technology to increase efficiency and assure quality
Treasa Ni Chonghaile, Senior Portfolio Manager on the KBIGI Energy Solutions Strategy, says, “The supply/demand imbalance will drive significant investment in energy solutions over the next two decades, in which technology and infrastructure in areas such as smart grid, LED, battery storage, power transmission and metering will play a major role. Our Strategy looks to harness the long-term growth opportunities in companies providing solutions to the challenges of generating adequate, clean and renewable energy to meet growing energy requirements globally and enables investors to access highly attractive potential returns.”
Addressing this challenge over the coming decades has obvious environmental and social benefits. In terms of directly measuring these benefits i.e. the impact of investing in these companies, KBIGI has carried out an in-depth analysis, using the United Nations Sustainable Development Goals as a proxy. This highly innovative tool (‘Revenue Aligned SDG Score’ or ‘RASS’) shows that in excess of 77%⁵ of revenues of the KBIGI Energy Solutions Strategy are contributing to the achievement of the SDGs.
The Strategy is 3.8% and 1.9% ahead of its benchmark i.e. the Wilderhill New Energy Global Innovation Index over 3 and 5 years respectively.6
– ENDS –
¹ Source: Population Division of the United Nations Department of Economic and Social Affairs United Nations, World Population Prospects 2019
⁴ Source: The Brookings Institution, ‘Delivering on Sustainable Infrastructure for Better Development and Better Climate’ 2016. Brookings Infrastructure Global Report: Sums are in USD trillions, constant 2015 prices and covering period from 2015 to 2030
⁵ Source: KBI Global Investors. Calculations are based on KBIGI’s own methodology and are not independently verified. Based on portfolio holdings as at 31.12.2018
6 Source: KBI Global Investors, Datastream and Bloomberg. Strategy returns are gross of fees in EUR at 31st December 2019 using GIPS Composite. Wilderhill New Energy Global Innovation Index benchmark returns assume the reinvestment of dividends after the deduction of withholding taxes. Our firm claims GIPS compliance and is annually verified by an independent verification firm to be so. The verification report from our verifier and our GIPS composite presentation are available upon request. The performance record disclosed here is that of the firm’s composite for this strategy. Gross results shown do not show the deduction of investment management fees. A client’s actual return will be reduced by the management fees and any other expenses which may be incurred in the management of an investment account. For example, a €1,000,000 investment with an assumed annual return of 5% with a management fee of 0.85% would accumulate €8,925 in fees during the first year, €48,444 in fees over five years and €107,690 in fees over ten years.
Journalists seeking further information or who would like to speak with KBI Global Investors should contact:
Phoenix Financial PR
+44 7799 767 468
NOTES TO EDITORS
1. About the KBI Global Investors Energy Solutions Strategy
Launched in 2006, the Strategy is a long-only, high-conviction global equity portfolio investing in 40-60 global companies providing low carbon solutions to the World’s accelerating demand for energy. The Strategy is actively managed by a highly experienced and specialist team and can invest across the full range of renewable sources including wind, solar, biomass, and fuel cells as well as investing in technologies that facilitate the integration of renewable energy into the grid and/or use energy more efficiently. This ensures that the Strategy is best placed to capture outperformance relative to the broad market from the energy solutions theme.
In constructing the Strategy KBI Global Investors created its own proprietary universe, made up of three sub-sectors: Energy Efficiency, Renewable Energy and Utilities. KBIGI believes this offers investors access to the future of energy i.e. clean and renewable energy, not traditional energy sources such as coal and oil, which are entering long-term decline and in danger of becoming ‘stranded assets.’
The Strategy has a high active share against the broad market, which means that the stocks in the Strategy are very different from those in a typical equity portfolio. The primary emphasis in the portfolio is on ‘pure plays’ i.e. companies which derive a minimum of 50% revenue from solutions to the challenge of providing adequate, clean energy for the planet.
The Strategy is highly differentiated with a tilt towards smaller-cap, less-covered names. Investors allocating to the Strategy can bring new sources of return and risk to their portfolios. The Energy Solutions team identifies under-valued stocks and emerging technologies less evident to more inexperienced or less specialised investment teams.
While the Energy Solutions Strategy invests in stocks across the market spectrum, it tends to be heavily overweight in smaller-cap and emerging market stocks, relative to a broad market index. Smaller-cap stocks tend to be under- researched by the stockbroking community and under-owned by larger, more generalist fund managers. This can allow the Portfolio Managers to find interesting stocks at attractive valuations and often leads to portfolio companies being acquired at an attractive price
2. KBI Global Investors and Natural Resource strategies
One of the firm’s principal goals is to be first to market with value-adding investment themes of the future. In the late 1990s, KBIGI was amongst the earliest investors to recognise the inherent source of alpha (the active return on an investment) from investing in companies providing solutions to sustainability challenges related to the provision of food, energy, water and the mitigation of and adaptation to the impacts of climate change.
Having identified a compelling clear need for investment in companies providing solutions to the global shortages of clean water and energy, the firm first launched strategies in these areas in 2000. Building up its team and intellectual capital in these themes, KBIGI added a climate change strategy in 2007, a sustainable impact agribusiness (food) strategy in 2008 and a sustainable impact infrastructure strategy in 2017.
From 2018 onwards, KBIGI has been reporting on the extent to which its Natural Resource strategies contribute to the achievement of the United Nations Sustainable Development Goals (SDGs). This significant initiative involves the detailed classification of all revenues of the companies held in each portfolio, determining whether the activity from which those revenues arise is contributing, positively or negatively, to one or more of the SDGs.
3. About KBI Global Investors (‘KBIGI’)
Established in 1980, KBI Global Investors is a specialist institutional asset management boutique, offering a range of Global Equities and Natural Resources strategies. The firm manages assets for a broad range of clients – public and corporate pension schemes, sub-advisory investors, foundations and endowments, wealth managers, private banks and investment intermediaries included. KBIGI enjoys a global client base and today holds mandates in the UK, Europe, North America and Asia as well as for some of Ireland’s largest and best-known corporations. Part of Amundi, the firm is headquartered in Dublin, with a representative sales office in Boston, Massachusetts.
KBIGI boasts a track record of delivering consistent and outstanding risk-adjusted investment performance over the longer term, its highly experienced investment team today managing €12bn. (This is the combined AUM of KBI Global Investors Ltd and KBI Global Investors (North America) Ltd as at 31st December 2019).
The firm is headed by CEO Sean Hawkshaw, with members of the KBIGI team holding 12.5% of the equity in the firm.
KBI Global Investors Ltd is regulated by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority in the UK. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. KBI Global Investors (North America) Ltd is a registered investment adviser with the SEC and regulated by the Central Bank of Ireland. KBI Global Investors (North America) Ltd is a wholly owned subsidiary of KBI Global Investors Ltd. ‘KBI Global Investors’ or ‘KBIGI’ refer to KBI Global Investors Ltd and KBI Global Investors (North America) Ltd.
IMPORTANT RISK DISCLOSURE STATEMENT
Under MiFID II this is deemed marketing material and should not be regarded as investment research. This material is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase any security, product or service including any group trust or fund managed by KBI Global Investors.
The information contained herein does not set forth all of the risks associated with this strategy, and is qualified in its entirety by, and subject to, the information contained in other applicable disclosure documents relating to such a strategy. KBI Global Investors’ investment products, like all investments, involve the risk of loss and may not be suitable for all investors, especially those who are unable to sustain a loss of their investment.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS
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The information contained in this introductory material has not been filed with, reviewed by or approved by any regulatory authority or self-regulatory authority and recipients are advised to consult with their own independent advisors, including tax advisors, regarding the products and services described therein. The views expressed are those of KBI Global Investors and should not be construed as investment advice. We do not represent that this information is accurate or complete and it should not be relied upon as such. Opinions expressed herein are subject to change without notice. The products mentioned in this Document may not be eligible for sale in some states or countries, nor suitable for all types of investors. Past performance may not be a reliable guide to future performance and the value of investments may fall as well as rise. Investments denominated in foreign currencies are subject to changes in exchange rates that may have an adverse effect on the value, price or income of the product. Income generated from an investment may fluctuate in accordance with market conditions and taxation arrangements. In some tables and charts, due to rounding, the sum of the individual components may not appear to be equal to the stated total(s). Additional information will be provided upon request. Our firm claims GIPS compliance and is annually verified by an independent verification firm to be so. The verification report from our verifier and our GIPS composite presentation are available upon request. The performance record disclosed here is that of the firm’s composite for this strategy.
Wilderhill New Energy Global Innovation Index: The Wilderhill New Energy Global Innovation Index is a global index of 98 companies listed on 29 exchanges in 23 countries whose technologies and services focus on the generation and use of cleaner energy, conservation, efficiency and the advancement of renewable energy in general.
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