By C WorldWide Asset Management | May 17, 2021 
Aman Kalsi, Portfolio Manager

C WorldWide remains excited about the multi-year structural growth opportunities created by the green wave that is sweeping the globe. In this article, Portfolio Manager Aman Kalsi looks to China in particular, which plans to step up its embrace of renewable energy sources to meet an ambitious long-term goal of carbon neutrality. 

Identifying sustainable companies has been at the core of C WorldWide’s investment process since 1986. Check out this article to learn more about how they identify long-term winners, including those that are set to benefit from this green wave. Investors can access their expertise in sustainability through the Canada Life™ shelf with the Pathways International Concentrated Equity fund.

The need to improve general public health in Asia creates good investment opportunities, especially for improvements related to the environment and air pollution, which offer multi-year growth potential.  

China and India are among the world’s most polluted countries and both are facing serious challenges. We regularly see pictures of what looks like heavy fog in the most densely populated areas. The fog is a disturbing image of the actual density of pollutants. 

China has been working to promote renewable energy sources for several years. In fact, the annual growth of production capacity of solar and wind renewables in China increased 50% between 1990 and 2019. China is today the world’s leading producer of solar energy, but in spite of this position, renewable energy still accounts for only 15% of the country’s total energy consumption. This picture will change dramatically in the coming years, however, with green energy becoming much more dominant not only in China, but also in the rest of the emerging markets universe.

The green wave across the globe

Renewable energy is gaining ground – not only in emerging markets (EM). Across the globe, the consensus is now that global warming is a fact. The EU has announced the European Green Deal, aiming to achieve climate neutrality in 2050 by striking a balance between carbon emissions and carbon absorption from the atmosphere. Japan has set a target of becoming carbon neutral by 2050 and China has set a similar target to be reached by 2060. This will promote developments and increase the share of green energy. In fact, over 50% of China’s energy consumption is expected to be met by renewable energy by the late 2030s, reaching 80% in 2060, in order to meet the objective of carbon neutrality (C WorldWide Asset Management, “Riding the green wave in emerging markets,” April 13, 2021) . The required investment in development and facilities is estimated to run to US$6-7 billion over the next 40 years – for China alone, that is – the global figure will be even higher. 

There is no doubt that the Chinese government has set an ambitious, long-term goal of carbon neutrality but C WorldWide actually believe it is a realistic goal as China has previously demonstrated its ability to meet long-term objectives. Pursuing green energy ambitions also makes good political sense, as there are more jobs in renewable energy than in the coal industry in China. Moreover, the world’s ten largest producers of basic solar cells are Chinese, together holding a global market share of 90%. As 80% of China’s demand for oil is met by imported oil, increased focus on renewable energy will also reduce China’s dependence on energy imports. 

How is air pollution measured?

In the context of public health, air pollution is typically measured based on the concentration of microscopic particulate matter (PM) in the air at the size of 2.5 microns (PM2.5). Particles of this size are formed as a result of emissions and chemical reactions in the atmosphere. With a diameter of less than 2.5 micrometres, which is about 33 times thinner than a human hair, they remain suspended in the air for longer compared to larger and heavier particles. A level below 35 on the PM scale is considered a “healthy” and generally harmless environment, so the situation in both China and India is critical since so many areas surpass this level on average.

Growth potential in the EM energy sector

In conclusion, C WorldWide sees attractive investment opportunities in renewable energy. We believe the long-term winners will be companies that can develop and produce renewable energy sources, but also specifically subcontracting companies with capabilities to develop the technology behind the green transition. We are therefore excited about the multi-year, structural growth potential presented by the green energy transformation and we have an increased focus on these investments, certainly in relation to companies in the Western world, but also in EM and in Asia in particular.

The views expressed in this commentary are those of this fund manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their financial advisor for advice based on their specific circumstances. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. Unit values and investment returns will fluctuate.

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