The super election year of 2024 lies behind us. In addition to another interest rate hike by the major central banks in the USA and Europe, it brought a potentially landmark election victory for Donald Trump in the US presidential election. What is in store for 2025?

In the Funds check series, the fund managers of selected funds look back on the developments of the past year and give their assessment of what to expect from the stock exchanges in 2025. (Please note: forecasts are no reliable indicator of future performance.)

Fund & Performance

The ERSTE WWF STOCK ENVIRONMENT invests worldwide primarily in companies in the field of environmental technology. The investment process of the fund is based on fundamental company analysis. The selection of stocks takes place with a focus on companies in which an environmental benefit could be identified and which primarily active in the areas of water treatment and -supply, recycling and waste management, renewable energy, energy-efficiency and mobility (Note: Please note that investments in sustainable investment funds involve risks as well as opportunities). A hedge against foreign currency risks is generally not provided, but is possible. Since October 2006, a cooperation exists between Erste Asset Management and WWF (World Wide Fund for Nature) and the fund management is supported by an environmental advisory board, initiated by WWF. At the same time, Erste Asset Management donates part of the management fee to the fund.

Note: Please note that an investment in securities entails risks in addition to the opportunities described. Past performance is not a reliable indicator of future performance.

The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation.

Commentary by fund managers
Clemens Klein & Alexander Weiss

How did the fund perform in 2024?

The fund recorded a very weak performance once again in 2024. In the first half of the year, it lagged behind the overall market due to rising interest rates. Interest rates are an important factor for the costs of renewable energy projects. While wind or solar parks have very low operating costs because their fuel is free, the majority of the costs are incurred at the time of construction, which means that higher capital costs are clearly noticeable. From the summer onwards, it was mainly political reasons that led to high volatility and significant share price losses for companies in the environmental technology sector.

After Donald Trump’s election victory on 5 November and, above all, the unexpected “red wave” (Senate and House of Representatives also with Republican majorities), fears have emerged that Biden’s climate protection law (Inflation Reduction Act, IRA) could be repealed by the incoming administration. Since its passage in the summer of 2022, the IRA has provided a significant tailwind for many companies in the renewable energy, electric vehicle, and green hydrogen sectors. First Solar is a case in point, one of the few remaining solar companies outside of China. While analysts expect the company to generate earnings per share of about USD 30 in 2026, the elimination of various tax breaks would cause earnings per share to shrink significantly to about USD 10. This also explains the losses of many of the fund’s companies, in some cases 50% or more, in the days following the US election. (Please note: the company mentioned here has been selected as an example and does not constitute an investment recommendation.)

 

What was the focus of the fund in 2024?

The fund continues to focus strongly on the energy theme, from renewable energy to energy efficiency, energy storage and mobility. In addition to climate change and the quest for energy autonomy due to the 2022 Ukrainian invasion, the enormous power demand of data centres, which are urgently needed for this future topic, is an additional driver. For example, demand for electricity in the USA will increase significantly in the coming years after years of stagnation. In addition to renewable energy, which is available quickly and cheaply, we have also increased the fund allocation to companies that benefit from the urgently needed expansion of the power grid.

 

What does the fund management team expect for 2025 in terms of global economy and trends?

The environment in which we have been operating since the election results has changed. Above all, there is uncertainty about exactly what Trump will do in his new, more powerful position. How this plays out for the coming legislative period remains to be seen. Trump even made positive comments about solar energy during the election campaign (“I'm a big fan of solar”). The areas of battery storage and grid expansion should continue to receive support, as these topics are also supported by Republicans. By contrast, we see e-mobility and offshore wind as being particularly negatively affected, i.e. these are topics on which Trump has publicly taken a negative position. We expect increased volatility in the coming year, but this will open up opportunities for active fund management to take advantage of excessive losses and buy on weakness. Despite the current negative sentiment, it is often forgotten that Trump has been president before. During that time, shares in the renewable energy sector were performing very well indeed.

 

What are your priorities in the fund, based on your expectations?

We maintain our strong allocation focus on the energy sector, which currently accounts for more than 70% of the fund volume, and we continue to focus on solar. Solar power is now one of the cheapest sources of electricity worldwide and also one of the fastest to connect to the grid. This has recently led to a significant increase in demand from large technology companies for the topic of artificial intelligence and the data centre capacities required for it. The waste & recycling segment is in second place, with around 12% of fund assets under management currently invested in it. The third thematic pillar of the fund, water, is currently invested at around 9%. As unpleasant as last year’s developments were for investors, they have led to a further sharp decline in the valuations of cleantech companies.

Despite significantly higher expected growth rates over the coming years, many valuation multiples are now well below those of the market as a whole. We cannot predict when sentiment towards this market segment will turn, and periods of exaggeration often last longer than expected in both directions. However, from a long-term perspective, it is always valuations and growth that lead to a good performance on the equity market, which is why we consider the current level to be attractive. (Please note: an investment in securities involves risks as well as opportunities.)

ERSTE WWF STOCK ENVIRONMENT

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N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated.

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Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units 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 units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to Art 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

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