The en e ener ergy gy trans ransiti ition on opp pportunity ortunity Capturing the potential returns from technological change
The Gl e Glob obal al En Energy ergy Transit ansition on This is government, consumer and investment led – put simply, the energy transition has started “ “ No matter which country you’re in, We do want to get to a point where the cost of clean energy now is renewables and other carbon-free cheaper than the cost of climate energy sources actually power our change later. Those betting on operations every hour of every day ” renewable energy will win big ” Urs Holzle, Senior VP of TI at Google, John Kerry, April 2018 Former US Secretary of State, April 2016 “ There won’t be any more coal -burning plants in Germany by 2038. We will primarily rely on renewable energy ” Ronald Pofalla, Chairman, Energy Commission of Germany, January 2019 “ If someone walks in with a solar “ It really is the economics as much project tomorrow and it takes a as anything that are driving [the billion dollars or three billion energy transition] and it will win in dollars, we're ready to do it. The the end ” more there is the better ” Michael Bloomberg, Warren Buffet, CEO of Bloomberg L.P, Chairman and CEO of Berkshire Hathaway, September 2018 December 2018 Source: Google, Schroders, as of May 2019. 1
The lo e low-car carbon bon en ener ergy gy transit ansition ion wi will be be h hugely ely di disruptive ruptive New investment and earnings opportunities will come from three key structural trends Decarbonisation of Electrification of Increased efficiency power generation energy use of consumption The energy intensity 1 of the The share of electricity generated The share of electricity in final from renewables is expected to energy consumption is expected global economy must fall by increase from 20% to closer to to increase from 20% to nearer nearly two-thirds by 2050 to limit 85% by 2050 in order to reduce 45% by 2050 due to the growth of the growth in overall power carbon emissions electric vehicles consumption 1 Energy intensity is the amount of energy needed to produce one unit of GDP. Source: Schroders, IEA, BNEF, IRENA, as of May 2019. 2
The en e ener ergy gy transit ransition on inve vestm stment ent op opportun portunity ity is massi ssive ve Realising the transition will require USD 120 trillion of investment by 2050 Required cumulative investment in key energy transition sectors out to 2050 USD trillion Supply-side investments Demand-side investments* Source: IEA, IRENA, BNEF, Schroders, as of January 2019. *Estimated demand-side investments include investments in end-user goods, such as electric vehicles and more efficient appliances and industrial process. SISF Global Energy Transition will only invest in the sections of these markets directly related to the energy system, with the investment in these specific sub-markets taking only a share of the overall investment. 3
The en e ener ergy gy transit ransition on inve vestm stment ent op opportun portunity ity is massi ssive ve Investment opportunities are spread across five key value chains Electric transport Transmission and Smart-metering and Investment area Clean energy generation Energy storage infrastructure distribution demand-response Key market Rapidly falling renewable Growth in intermittent Increased electric vehicle Increased daily load through Requirement to improve growth drivers energy costs power supply penetration requires new electricity networks energy efficiency charging infrastructure Supportive policy Shifting load demands from New renewable capacity Need to integrate flexible environment electric vehicle growth located further away power generation and from demand increased load Growth in electricity demand from electric vehicles 30 4 4 20 4 Cumulative investment to 20 2050 vs. current market 2 2 10 2 capitalisation 10 (USDtn) 0 0 0 0 0 Estimated current industry market capitalisation Required investment to limit climate change to 2 ° C Projected investment under current policies Estimated compound annual revenue growth 2 – 9% 4 – 6% 15 – 20% 3 – 11% 9 – 24% to 2035 2 Source: IEA, IRENA, BNEF, Schroders, as of January 2019. 1 SISF Global Energy Transition will only invest in the sections of these markets directly related to the energy system, with the investment in these specific sub-markets taking only a share of the overall investment. 2 Estimated annual revenue growth range based on Schroders projections under different scenarios. 4
Sc Schrode roders rs com ommodity modity funds ds A well-fitting addition to the existing portfolio of commodity funds Launch date Vehicles Performance objective Assets Style Fund Schroder AS 1 Long only, 2005 Part II SICAV, US LP Index plus Mainly futures Commodity Fund unconstrained Schroder ISF Global Long only, Energy Transition 2019 UCITS SICAV Index plus Equities unconstrained strategy Long only, Schroder ISF 2006 UCITS SICAV Index plus Equities unconstrained, Global Energy high beta Schroder ISF Long only, 2016 UCITS SICAV Index plus Equities Global Gold unconstrained 1 Schroder Alternative Selection is referred to as Schroder AS throughout this presentation. Source: Schroders, as of May 2019. 5
SI SISF SF Glob obal al En Ener ergy gy Transit nsition ion Investment proposition Objectives Investment approach Role in portfolios i. Offer all investors actively managed Unconstrained thematic approach that As a long-term, sustainable growth play exposure to the energy transition transects traditional sector classifications, that takes advantage of structural sector as the world shifts towards a style biases, geographies and earnings growth over multiple lower-carbon energy system. market capitalisations. business cycles. ii. Outperform its stated benchmark Concentrated focus on finding long-term, As a source of equity diversification due over the long run. sustainable earnings growth at a to the agnostic approach taken to reasonable value. geographies, style biases and iii. Outperform competing funds over traditional sectors. the long run. Use of an investment process established since 2005 and designed specifically for As a thematic investment , able to active investment management in circumvent issues such as political and commodities and resource equities. monetary policy challenges and tap into the growth sectors of the future. Highly active allocation that creates opportunities to generate excess returns above passively-managed alternatives. Long-only, no leverage, no complicated derivatives. Risk controlled through liquidity limits, the 5/10/40 concentration rule and use of cash. Source: Schroders, as of May 2019. 6
SISF SI SF Glob obal al En Ener ergy gy Transit nsition ion Leveraging established expertise and a proven investment process Global SISF Global Energy Focus list Energy Transition ~120 stocks Transition universe 30 – 50 stocks ~2000 stocks Focus and build Construct portfolio Screen universe – Broad universe of companies exposed to the – Create and maintain detailed financial models – High conviction portfolio energy transition screened using descriptive of focus list companies – Global reach and financial metrics – Monitor live valuations from focus list – Unconstrained thematic approach – Broad universe screened further based on – Fair value based on DCF is upside ranked – No shorting or leverage revenue exposures, liquidity, size, and country- – Bespoke GARP screen used to find companies – No physical exposure risk to find the best-in-class companies within undervalued companies with strong key technology groups that are most exposed – Maximum cash 30% growth potential to the energy transition theme – Focus on companies with high returns on investment, strong management, and sustainable business models Source: Schroders, as of May 2019. 7
SI SISF SF Glob obal al En Ener ergy gy Transit nsition ion A well-diversified thematic investment universe 1 Sub-sector spread Market capitalisation spread Regional spread % share % share % share 1 Represents share of focus list companies, which is reflective of the investment universe. Source: Schroders, as of May 2019. 8
Recommend
More recommend
