Interview with fund manager Clemens Klein
What sort of performance did the fund achieve in the first half of 2022?
In a difficult market environment, ERSTE WWF STOCK ENVIRONMENT also recorded a negative performance in the first half of 2022. This is mainly due to the rising interest rates, which were detrimental in particular to the growth segment among equities, which many of the companies in the fund belong to as well. Growth shares excel in terms of strong growth, but they also command higher valuations and often generate earnings far ahead in the future. As a result, higher interest rates – and thus, a higher discount factor – have a more negative impact on growth shares than on companies with lower valuations and slow growth.
Also, small caps were harder hit than blue chips. ERSTE WWF STOCK ENVIRONMENT is strongly invested in this segment as well. The war in Ukraine has drastically stepped up the urgency to switch to alternative sources of energy again, which in recent weeks has had a positive effect on many companies in our environmental funds.
How is ERSTE WWF STOCK ENVIRONMENT currently positioned? What is your focus in this fund?
We have used the recent months to get in touch with numerous companies in our portfolio and to talk about the current environment and the future prospects with the respective management teams. We have also selectively bought when prices were attractive and have further stepped up the weighting of renewable energies and energy efficiency. In doing so, we have put the focus on Europe and on companies with strong operations in Europe. We can see the biggest urgency for action and thus the highest growth potential here.
ERSTE WWF STOCK ENVIRONMENT currently puts a strong focus on energy. Close to 60% of the fund’s assets are invested in wind and solar power as well as energy efficiency. The sector is currently getting support in particular from the political front and from attractive valuations, amid sustainably strong demand. The turbulences in the supply chain remain a problem. We are also invested in waste management & recycling (13%), mobility (7%), water (7.5%), and energy storage (6%).
What is the outlook for the fund in the coming months?
The general macro-economic and market environment makes predictions difficult. That being said, we continue to regard renewable energies as highly positive. The interest in these forms of energy is driven by the fundamental strength of the respective technologies (N.B. wind and solar power remain the cheapest power sources; please refer to the chart) and by political will, especially in the EU. The RePower EU plan, for example, which has recently been proposed, calls for a target energy mix of 45% renewables by 2030 (after a target of 28% in 2018). The approval process of wind and solar projects is to be sped up massively, and sun collectors on roofs are to be subsidised even more significantly. In addition, the plan suggests creating a supply chain for green hydrogen. The expansion of heat pumps is to be subsidised in order to achieve independence from Russian gas as quickly as possible.