Morningstar: Mrs. Jankowska, what is the philosophy of the fund you manage – Allianz RCM Global EcoTrends? What differentiates you from your competitors?
Jankowska: The objective of the Fund is to invest in global, environmental technology solutions, which are being driven by global trends such as demographics and urbanisation, emerging market growth, climate change, efficient use of resources, energy independence and tightening government policy and legislation. This presents a myriad of investment opportunities ranging from low carbon energy, water and pollution control technologies to energy efficiency and green chemistry. The fund itself is structured along three key clean technology themes: eco-energy, pollution control and clean water – creating a broad and diversified universe of stocks from which I can pick. It is this level of diversification that in my view sets the Fund apart from the competition. Because it is able to invest in so many different and emerging themes, it can take advantage of the entire spectrum of clean technology investment opportunities rather than just being restricted to a single theme such as climate change or water for instance. Another point of differentiation lies with the research inputs into the Fund. Having an established and dedicated team of clean technology analysts supported by the global RCM research platform and our proprietary Grassroots Research network, we are able to spot emerging trends ahead of the market and have an information advantage.

Morningstar: Clean technology investments comprise a wide field of investments. What are the most important trends within clean technology?
Jankowska: Currently, the most prominent trends exist in alternative energy and low carbon technologies, with the most exciting area being energy efficient LED’s :Light Emitting Diodes. Part of that is being driven by the growing awareness from businesses and consumers of environmental issues such as climate change. For businesses this can be especially powerful when making long-term investment plans, anticipating consumer purchasing trends or anticipating what environmental regulatory requirements may be placed on the business over the coming years. However, the most important trend at present within the clean technology sector is the evolution of environmental policy and regulations, which are currently a key driver for the adoption of clean technologies.

Morningstar: Where do you see the biggest demand for clean technology from a regional point of view, where is the biggest growth?
Jankowska: Since we launched the Fund in 2006 demand for clean technologies has shifted among regions. In 2006 and 2007, greatest demand was arising from Europe as governments introduced attractive feed-in tariffs for alternative energies such as wind and solar. This led to significant growth in countries such as Germany and Spain. The US also saw growth in wind and biofuels and to a lesser extent solar installations. As the global financial crisis hit in 2008 and we entered a global recession the clean technology sector suffered along with many others due to a lack in the availability of financing. Looking ahead now we expect demand for low carbon technologies to return in the US and in part in Europe as financing and the economic environment improves, whilst growth will continue to remain robust in China. Most importantly, over the coming years demand for clean technologies is going to be global as governments adopt different timeframes and targets to meet their national environmental agendas.

Morningstar: What are the biggest challenges? Aren't the investments to some extent relying on Government subsidies? Do you see rising risks here given the high borrowing level of Governments and the pressure on Governments to tighten their belts?
Jankowska: The removal or cutting back of subsidies is the biggest risk to the clean technology sector particularly alternative energy. However, there is a degree of visibility in the Government subsidies and these being backed by the Government, create some certainty. The high level of Government borrowing is an obstacle however so is the challenge of energy security and independence, as well as climate change. The aggressive price drops we saw in alternative energy in 2008/2009 has led us closer to these technologies being able to stand on their own without the need for subsidies. The added challenge in investing in the clean technology sector is getting a handle on the potential for growth, as many technologies are still new and innovative.

Morningstar: How do clean technology stocks perform versus wider global equities, over the cycle?
Jankowska: The clean technology sector does not have a long history to compare over cycles and it is still evolving. We expect to outperform the wider market as many of the themes we are investing in will span many years and will continue to become more important and grow faster than the market. The LED sector is a good example. We are excited about LED’s where over the shorter term we are seeing high adoption rates in TV backlighting. Over the last year LED stocks have returned 300% over the last year in comparison to the MSCI World which returned an average of 46%. What is crucial to note, is that the LED sector is still at the very early stages of growth with full market adoption yet to fully come through.

Morningstar: Where are the clean technology companies located? Does the clean tech investor get a global product?
Jankowska: The Global EcoTrends fund has a global remit and we believe is therefore extremely well positioned to capture opportunities worldwide. Although it is equally important to understand the peculiarities of each region, which we believe we are well equipped to do given RCM’s global research platform. The nature of our universe is mainly defined by mid-cap companies which creates an advantage as they also have the greatest potential to be mispriced. We also have some mega cap exposure.

Morningstar: What are the biggest share price drivers of the most important segments within clean technology? Is it the energy price, the economic cycle, interest rates?
Jankowska: All of these factors are important. The energy price (oil and gas) has a bearing on alternative energy stocks as it is correlated to electricity prices. However investors in alternative energy projects do not look to energy spot prices when assessing the viability of projects. They instead would assess the energy outlook for say 20 years with a view to providing an alternative energy project that is government guaranteed via feed-in tariffs, is not exposed to the volatility of energy costs and as a result, provides stable cash flows for the life of the project. What drives clean technology stocks is the same as the drivers for any equity investment: cash flows and the return on investment the company generates in the long term. This then relates to the company’s competitive positioning, the economic cycle, the quality of management and the defensiveness of the company’s position i.e. does it have proprietary and differentiated technology.

Morningstar: Mrs. Jankowska, thank you very much!

The interview was conducted by Morningstar analyst Marzena Lange.

Ursprünglich erschienen in der GoingPublic Ausgabe 6/2010.