Amanda O’Toole, manager of the AXA WF Framlington Clean Economy fund highlights the growing importance of the CleanTech market when investing sustainably
Huge demographic, environmental and economic changes are influencing the political and social drive to find clean technology solutions, with the global CleanTech market predicted to expand to $1.3 trillion by 2020, up from $601bn in 2014.
CleanTech means different things to different people but we look at it via four big themes which are at the forefront of this drive to live in a cleaner way; sustainable transport, smart energy, recycling and responsible nutrition.
A global trend, it currently gives us a universe of 1,100 listed, investable companies around the world, of which 700 have the highest exposure to it. But we think the market has the potential to expand substantially from here for a number of reasons.
Firstly, the universe itself currently has a structural growth rate of more than 10% per annum, something which on its own is a very attractive characteristic, but when put in a wider context versus other industries offers a variety of benefits.
Structural trend growth, for example, can be far more resilient to any slowdown in the global economy.
Take precision agriculture. This emerging farming management concept aims to enhance crop yields by implementing information-based decision making. With countries around the world at different stages of implementation, we believe it has the potential to last for many years, just as previous agricultural revolutions have been multi-decade events.
The potential longevity of that trend is true across the CleanTech universe. One just has to look at China and its desire to rely far more heavily on renewable energy to fuel its economy. This is being manifested by cutting down on dirty coal power and shifting to renewable energy, so even if electricity demand does fall in the event of a downturn, renewable demand is likely to be more resilient because it is favoured over other power sources.
Clearly, if the global economy slows it will still be impacted, but in essence CleanTech is not relying on the world growing in order to grow itself.
Finally – and one factor which should not be underestimated – is the desire by the populace at large to live in a better and more sustainable way.
This should continue to create a powerful underlying growth driver which is largely protected from the cyclicality of economies.
Of course, one has to pick the right companies to benefit from these trends as there will be winners and losers. But one thing is certain – these trends are getting stronger and more prevalent, and can quite simply no longer be ignored, with corporates across the world increasingly recognising this.
About Amanda O’Toole
Amanda is a Global Portfolio Manager at Framlington Equities. Amanda was previously a member of the Emerging Markets team with a focus on energy, utilities, consumer and healthcare. Prior to joining AXA IM, Amanda was an Investment Analyst at Nevsky Capital, covering Europe and then Emerging Markets across a range of sectors with emphasis on energy, utilities and consumer. Amanda began her career at PricewaterhouseCoopers, initially in Corporate Recovery and latterly in Corporate Finance. She holds a BA (Hons) in Economics from the University of Newcastle Upon Tyne and is an Associate Chartered Accountant.
 Financier Worldwide, “Investing in the clean technology revolution”, January 2016, cited via the AXA Investment Managers website.