The victory of the Republican Party in the last American elections, with Donald Trump as the new tenant of the White House for the next four years, will not substantially affect the change undertaken by Europe for years in its strategy of betting on the energy transition . and clean energy. Yes, this can influence the momentum that certain sectors can gain in the short term, but, at a time of widespread interest rate cuts around the world, companies linked to the issue of sustainability can also benefit from it. diversification of technological stocks.
This is what the participants in the third round table of the IV ESG Forum of elEconomista.eswhere various representatives of investment firms stressed that the effort undertaken by Brussels to transfer a trillion euros of brown assets to greener assets will not be changed as radically as the hyperbolic threats of Trump on plans to eliminate the Inflation Reduction Act. (IRA), approved by Democrats during the last legislature to control price increases.
Beatriz Pérez, fund manager Income 4 megatrends Environmentrecalled during his speech that 60% of renewable energy production in the United States comes from states governed by Republicans. He therefore considers it unlikely that they will completely eliminate the IRA, although he believes that Chinese solar companies will also be affected. on the side of the imposition of customs duties. But, he says, even in this environment, opportunities can arise, if political noise is isolated, for active management.
Elena Guanter, Iberia & Latam client relations manager and head of development at Candriam, expressed the same opinion, highlighting the thousands of jobs that North American renewable energy companies have created in key states like Texas , in a context of strong competition to attract. investment flows which are already heading towards other geographical areas such as Asia-Pacific, in particular from Australia, Japan and Korea and taking into account the fact that “socially responsible investment has always been “negligible in the United States, compared to other countries,” he stressed.
Jorge Urriza, head of sustainability and ESG at Ibercaja Gestión, said that the measures envisaged in the IRA have already started and that it would be very difficult to cancel many of them without harming the interests of the republican states themselves. same, and he highlighted the competition that would be implied by China’s determined commitment to renewable energy, while Europe focuses on transferring all the investment efforts that companies deploy to the final investor through the products.
This is why Antonio López, Head of Sustainability and Action Manager at March AM, warned that Europe is very clear on the energy transition, as demonstrated by the regulations developed in this regard in recent years, and that they will therefore have to be North American investment funds. Managers will have to adapt to this reality if they want to distribute their products on the Old Continent, he assured.
Reach the minority
Beyond these reluctances, the participants in the third round table recommended simplifying the information that investors receive in funds classified as socially responsible so that their distribution is easier and adapted to their needs. “We must be able to reach the end customer with their usual vocabulary,” said Urriza, for whom it is difficult for a particular investor to understand the differences between what it means to be classified as section 8 either section 9according to European regulations. “These are very difficult concepts to sell because they are not user-friendly at all. Investors demand clear information and we need to be able to explain to them that they are not giving up profitability by betting on sustainability, but that even the integrating makes it possible to measure portfolio risks,” he underlined.
Elena Guanter recalled that discretionary portfolio management having gained a lot of weight in the distribution of funds, individual clients do not know the underlying assets of these portfolios, because they are selected by those responsible for their management. And how these portfolios are constructed, through what we call building blocksor investment blocks by asset allocation, managers require products exposed to certain assets but without very marked investment bias, which is more complicated to guarantee in sustainable funds, already determined by their own themes.
For the sustainability manager of March AM, it is important not only to have products with the green seal but above all to have sustainability criteria that permeate the entire investment process in the portfolios, in addition to investing in sectors or companies that allow tactical capture of the short term. profitability.
There are investment opportunities beyond green, such as in the healthcare sector
Although in recent years socially responsible investing has tended to be associated with green issues, those linked to the E in the ESG acronym, which include renewable energy, there is a broader range of topics that would fall squarely within this definition. , such as the health sector. In this sense, at Candriam, they are pioneers in a fund of companies linked to oncological research, the Candriam Equities L Oncology Impactwhich is in fact classified article 9 according to European regulations, which means that it has a defined sustainability objective in the selection of securities.
Elena Guanter explained during her speech that investors have been very concentrated in recent years in technology companies, particularly those known as Magnificent Sevendriven by the artificial intelligence narrative, but as investors seek portfolio diversification in a lower rate environment, “there are investment opportunities in the healthcare sector, less tied to the cycle economic and which can play a more important role. defensive role in portfolios, in addition to the fact that it presents attractive valuations,” said Guanter, who also recalled the social work carried out by funds like that of his manager in oncology research. And he cited a fact that the company strictly follows: 50% of the securities its Article 9 funds have in their portfolio must have the highest-rated companies in sustainability rankings.
We maintain an active dialogue with companies to learn about their transition projects
Although the concept of sustainability continues to be closely associated with certain sectors or companies closely related to this topic, such as renewable energy or water treatment, almost all companies already have plans to reduce their carbon footprint and to that the life cycle of the products they manufacture or the services they sell do not harm the environment. This is the objective pursued by the European Union and which makes it possible to channel investment flows towards companies still in transition in their transformation process.
And for managers, this also represents an opportunity when selecting stocks. “We maintain an active dialogue with companies to find out if they have active transition plans and what their decarbonization goals are. This factor cannot be lost in the investment process, as companies that improve can enter in the investment universe”, underlined Jorge Urriza, head of sustainable development and ESG at Ibercaja Gestión.
An important factor because in this universe numerous input filters and numerous criteria are applied to be able to make homogeneous comparisons on this subject between companies in the same sector. “With the new European regulations, it is expected that sustainable investments will not only be directed towards purely sustainable companies, but also that we can motivate change and attract capital flows towards this transformation,” Urriza said during his speech.
There are obvious catalysts for investing in renewable energy companies
Even if the victory of the Republicans in the United States could suggest that the days of renewable energies are numbered, Beatriz Pérez, director of Income 4 megatrends Environmentthink otherwise. “There are clear catalysts for investing in renewable energy companies, such as the lower interest rate environment and decreasing investment in battery storage-related companies and the stability of energy sales contracts in the long term”, underlined the manager, for whom the outflows of money in recent years from impact funds, those classified article 9 according to European regulations, did not occur so much due to a lack of interest of investors but rather due to the sectoral rotation caused by the inverse macro process, that of the increase. rates, which are precisely the type of companies most present in the greenest funds and which have therefore been the most affected.
On the contrary, in funds classified as Article 8, by having a broader investment universe, such as technology stocks or the banking sector, they have benefited from falls in the price of silver. “But with the expectation of a rate cut from the ECB and FED, it is only a matter of time before this sector rotation begins towards the most penalized companies, which trade at multiples very attractive with potential for exponential growth”, underlined Pérez, for which much more training is needed for investors.
It makes no sense that funds classified as sustainable cannot ultimately be chosen
The strict regulations to which managers were subject when designing and structuring their funds if they wanted to have the sustainable label, either in its most lax version, that of Article 8, in which companies that promote sustainability objectives in a generic way, or the most restrictive, that of Article 9, which is granted to products that pursue a specific sustainability objective, has required a significant effort on the part of companies to comply with the regulations.
But on the investors’ side, in the new suitability tests that they must undergo in order to determine their preference for this type of investment vehicle, it would not be decisive that the products have the highest sustainability rating, if certain criteria and requirements are met. knowing that there is still no taxonomy on the social aspect, the E in the acronym ESG.
A fact that leads Antonio López, responsible for sustainable development and variable income manager at March Asset Management, to show his perplexity because “it makes no sense that when a client takes the test, they later discover that they have less supply.” “It is possible that a product classified in Article 8 is not eligible, why are they making this investment effort on the part of companies,” asks López, who warns that the lack of sustainable funds creates a problem. According to him, thematic funds of this type have their place in the market, even if it is “difficult for them to shine in a bull market”. But there are segments that can do it reasonably well,” he stressed.
