The ERSTE GREEN INVEST invests its capital in sustainable companies in the renewable energy or water management sectors. It also supports companies that play a pioneering role in the conversion of environmentally harmful processes of the "old economy".

Turbulent first half year on the markets

The sentiment on the equity and bond markets was clearly down in the first half of 2022. Numerous factors are driving the current affairs at the moment. For example, inflation has increased significantly since the end of last year, which led the central banks like the Federal Reserve in the USA and the European Central Bank (ECB) to take action. In reaction to the drastic increase in inflation, the central banks tightened their monetary policy and heralded the end of low interest rates. The Ukraine war and increasing geopolitical tensions are also burdening share and bond prices.

The situation created by these three factors has increasingly led to concerns about economic growth, which is also reflected in the economic data. The development of the market environment in the second half of 2022 should therefore depend crucially on the path of inflation. Due to strong base effects, experts suggest that inflation might peak in autumn. The development of the Ukraine war from here on out will also remain an uncertainty factor for the rest of the year. Given this context, the risk of a recession is particularly high in Europe at this point in time.

For more information on a regular basis, please visit the investment blog of Erste Asset Management. Here, you can find not only articles and comments on the status quo of the market, but also interviews with experts of Erste Asset Management and interesting facts about funds and investments.

In the exclusive interview below about the first half of 2022, fund manager Clemens Klein talks about his assessment of the YTD performance of the fund and his outlook for the coming months.

Interview with fund manager Clemens Klein


What sort of performance did the fund achieve in the first half of 2022?

The fund performed negatively in the first half of 2022 due to the difficult environment, as did many others. This was largely the result of rising interest rates, which were detrimental to growth shares in particular. Many companies in the fund belong to this segment. Growth shares excel on the basis of strong growth rates, but they command higher valuations than other equity segments and sometimes achieve earnings only far ahead in the future. As a result, a higher interest rate, i.e. a higher discount factor, has a more negative impact than it has on companies with lower valuations and slow growth. The war in Ukraine has put even more pressure on the need to switch to alternative sources of energy, which has recently had a positive effect on many titles from this area held by ERSTE GREEN INVEST.

 

How is ERSTE GREEN INVEST 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. We have increased the energy focus in the fund: more than 50% 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 transformation (20.4%), adaption (9.6%), water (9.2%), and recycling (7.9%).

Clemens Klein

(c) Photo: Stephan Huger

„The valuation of green equities is currently at a 5Y low.”

Clemens Klein, fund manager ERSTE GREEN INVEST

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 (wind and solar power remain the cheapest power providers; please see 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. Renewable energies have a disinflationary effect in the current environment: if you own a solar heating system, a heat pump, a battery, and maybe an electric car, you are autonomous and independent of high electricity, gas, and diesel prices.  These are all reasons to remain positive about the sector. We regard our segment and our fund as well positioned in a difficult environment. The valuation levels are at a 5Y low, even though the political support (EU, USA, China) for sustainability has improved substantially.

Note: Past performance is not a reliable indicator of an investment’s future performance.

Performance chart since fund inception

Important legal note:

Due to the very short term, this presentation of the performance is not very meaningful.

Disclaimer

This document is an advertisement. All data is sourced from Erste Asset Management GmbH, unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in Amtsblatt zur Wiener Zeitung in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH, pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to § 21 AIFMG, and the key investor document/KID can be viewed in their latest versions at the  web site www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the key investor document is available, and any additional locations where the documents can be obtained can be viewed on the web site www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

This document serves as additional information for our investors and is based on the knowledge of the staff responsible for preparing it at the time of preparation. Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund. Please note that investments in securities entail risks in addition to the opportunities presented here. The value of shares and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your shares. Persons who are interested in purchasing shares in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

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