19th January 2011
The number of ‘climate change' stocks available globally has rocketed from 510 in 2007 to nearly 800 now according to fund manager Schroders.
The firm, which runs the Global Climate Change fund, identifies five main drivers in the sector energy efficiency, clean energy, low carbon fossil fuels, sustainable transport and environmental resources.
It believes energy efficiency should generally offer a higher return than new energy technologies, and favours stocks such as Philips, an expert in LED lighting, and Ameresco which undertakes energy efficiency programmes for public and private organisations in the US.
The firm is a fan of global sustainable transport and identifies Borgwarner, a leader in dual clutch transmission and turbo charging technology as a favoured stock. Both technologies are important in helping auto manufacturers meet tougher fuel and emissions regulations.
With global carmakers increasingly embracing electric and hybrid vehicles the firm also favours battery makers LG Chem and JCI Saft.
In terms of clean energy, Schroders believes the sector will need more help from regulators and an improvement in global energy markets to drive performance. It says European producers may face increased competition from Asian firms as Asian domestic markets see reduced economic growth. It is also concerned that European politicians are increasingly concerned at the cost of solar energy subsidies.
In terms of the low carbon fossil fuel sector, Schroders notes that 2010 was a bad year for natural gas markets with inventories remaining high although it says long term the prospects are good because almost every major economy sees natural gas as its preferred fossil fuel.
Finally the firm believes environmental resources remain a key theme with the proviso that "rising pressure on agriculture, water and forestry prices lies in careful
management of land and investments in a range of productivity improvements". Holdings include Potash, AGCO, Syngenta and Monsanto.