As we celebrate the 50th anniversary of Earth Day, Henning Padberg and Thomas Sørensen, Managers of the Global Climate and Environment strategy of Nordea Asset Management, share their thoughts.
“Our outlook for 2020 has changed since the last quarterly report primarily due to the outbreak of Covid-19, which has harmed economies all around the world. It’s still too early to assess the magnitude and length of this economic downturn and how it will affect companies’ earnings. However, the market was quick in pricing in a global recession and we believe that the pandemic will eventually subside, economies will rebound and equity markets will anticipate the recovery in advance.
We believe the overall outlook is solid driven by accelerating underlying drivers. Many solutions are economically viable, generate attractive returns and offer quick payback times, which is why they see increasing adoption. We continue to find great bottom-up investment opportunities in companies that can capitalise on global climate solutions that add economic and environmental value to end users.
We currently see significant opportunities for companies focussing on solutions within “Resource Efficiency” and “Environment Protection”. The main reason for the attractiveness of these areas is based on very attractive returns and payback times for these solutions. Saving electricity, using less resources or deploying more efficient products translates directly into a better value proposition for clients. We also see that changes in the environment like more volatile weather patterns and bad air quality are triggering a wave of investments in areas like Clean Water & Air and Environmental Services. Consumers are increasingly concerned about the environment and are therefore demanding products that are environmentally friendly, i.e. made from organic or natural ingredients and produced without causing pollution. It is also important for these “green” consumers that raw materials in the end-products are traceable and these are delivered applying sustainable packaging solutions.
We believe that medium-sized growth companies are often better positioned to capitalise on Climate & Environment solutions. These companies are often innovators in their categories have strong industry positioning or offer specialised services to their clients. Companies with smart climate solutions that are global leaders in niche markets offer the best opportunity from our point of view. Political and macroeconomic factors exist, but we don’t think these outweigh the opportunities and are valid concerns across financial markets.”