Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Investors must look beyond the big-name green companies
AXA has launched two new green strategies as part of its plan to expand investment portfolios and rollout into Australian markets. The AXA IM Global Green Bond Fund and the AXA IM Clean Economy Equity Fund will join AXA IM’s flagship Sustainable Equity Fund, which was launched back in 2014.
Speaking with portfolio manager, Amanda O’Toole, who runs the Clean Economy fund, she highlights that the fund is an actively managed portfolio of high-quality, growth-oriented companies operating in key investment areas impacted by the finite amount of natural resources.
“Launching this fund for me was lovely, for 15 years I’ve covered renewables, the carbon markets and clean tech, and the sector back then was very small. Fast forward to now, it’s huge. Back when I started looking at renewable businesses, there were no economics or rationale for adopting these companies. It was quite a tough sell. What has changed is that now there is an economic rationale for a management team to invest in this sector,” says O’Toole.
The Clean Economy Equity fund is a high-conviction portfolio of 40-60 global listed players focused on energy transition and resource optimisation.
“It’s increasingly a cost issue,” says O’Toole. “There are various regulations regarding emissions and discharges, and there are fines associated with them. That means there is a real economic rationale for the management team to decide it can survive green technology, and that’s a huge change from only doing it when you have spare cash. And that’s really why we invest in products and services that enable companies to make the transition.”
For instance, O’Toole says she wouldn’t invest in a data centre company. “But I do benefit from the fact that they need renewable energy and efficient solutions to manage their carbon footprint. It’s always the product and services.”
The four areas that she invests in are: low-carbon transport, smart energy, agriculture and food, and natural resource preservation. Commenting on lower-carbon transport options O’Toole says, “I don’t think you can justify investing in an electric vehicle (EVs) manufacturer and ignore the supply chain that helps create it. By taking a benefit without recognising issues downstream. There are green lithium businesses that finding ways to extract lithium using far fewer chemicals that are damaging to the environment.”
From an investment standpoint, the idea is that investing in something sustainable must be economic and must be viable. Within the electric vehicle industry, she says, there is the problem of recycling batteries. “There are businesses that have recognised the situation and have developed cleaner, more environmentally friendly ways to extract these materials. It stops you from being just a commodity player with a thin narrow margin because you’re adding value beyond the commodity,” says O’Toole.
She concludes by saying she looks for “businesses that invest in something sustainable because these companies are able to supply long-term contracts with better visibility, lower risk and broader margins. And obviously a hugely growing feedstock, like batteries.”
