TAKE a trip around emerging Asia these days and you won’t just see skyscrapers and coal-fired power plants growing out of places where there were once nothing but fields. Wind turbines, solar energy plants, incinerator manufacturers, water treatment plants and microirrigation developments are just as likely to spring up before your eyes.
There is now recognition in the region that sustainable growth requires tackling the environmental issues such as water scarcity and climate change that have arisen as a result of rapid population growth.
Fund managers looking for strong growth opportunities are increasingly targeting environmental and sustainable industries. Khiem Le, a manager of the Axa WF Framlington Global Environment Fund, says the opportunities in the sector mean it will enjoy plenty of demand from institutional investors, unlike other industries such as auto, media or even finance. Firms across the region such as Chinese smart meter provider Wasion, Indian microirrigation firm Jain Irrigation and Manila Water in the Philippines are benefiting as a result.
While the Axa fund is global, some funds are targeting the Asia-Pacific area specifically. Impax Asset Management launched its Asian Environmental Markets closed-end investment trust last October to do just that and Jupiter followed suit in mid-December with its China Sustainable Growth fund.
The Impax investment trust has a total fund size of £122.6m and its net asset value (NAV) has grown by 10.3 per cent since its launch. The four-month-old Jupiter open-ended fund is gently building up assets under management – it currently has around £19m.
These funds seek long-term returns, making them ideal for pension funds – the second biggest declared shareholder in Impax’s Asian Environmental Markets trust is the London Pension Fund Authority. The biggest shareholder is Invesco Perpetual, which is gaining from Impax’s environmental expertise and network in both the region and the sector. Both funds are looking to get in early and capitalise on emerging Asia’s long-term growth prospects.
Policy is also shifting, says Bruce Jenkyn-Jones, who manages the Impax fund: “We detected a sea-change in the approach of governments in the region to the [environmental] sector and the propensity to launch budgets and policies to support it.” For example, the past few years have seen Chinese wind turbine manufacturers becoming competitive with US producers, thanks in part to government support.
Fund managers looking at growing their exposure to Asian environmental markets should not try to find the perfect company. Philip Ehrmann, manager of the Jupiter China Sustainable Growth fund, says that in an environment which is so young and where there is so much change, you won’t find them. “We are seeking companies which make money as a result of becoming leaders in their fields and contributing towards sustainable growth,” he explains. “As they make progress, so do you and you can increase your exposure.”
In just over a decade China is expected to become the world’s largest producer and consumer of alternative energy, according to experts.
China’s installed wind capacity has doubled in each of the past four years.
In addition, in just a little over four years, a mix of government and foreign investment has transformed the Chinesport city of Tianjin city into the global manufacturing hub of the world’s wind power industry.
The country also has one third of the global solar panel market.
Many experts now seem reasonably optimistic that China could meet its ambitious renewable energy plans to derive at least 15 percent of all energy from renewable sources by 2020. The country also is striving to reduce energy intensity per unit of GDP by 20 percent over a five-year period.
All this in a country that has some of the worlds most polluted air and water.
Ironically the country is poised to be at once the world’s leader in alternative energy — and its leading emitter of C02.
Alternative energy as a percentage of the total energy mix is increasing, but it will complement — not replace — growth in coal power. In fact, in a decade coal is expected to supply about 70 percent of China’s energy. Because of the sheer scale, diversity, and complexity of China, it is possible for the country to take some great green leaps forward while at the same time having its rivers remain black and its air quality a health hazard.
China is set to rule the global solar panel market having already captured a third of the world market.
The credit crunch has hit solar power companies in the West, but not Chinese firms. They have taken advantage of the moment to flood the world with solar panels, driving down the retail price from $4.20 per watt last year to nearer $2 in what some say is a cut-throat drive for market share.
In addition Suntech Power from Wuxi has just broken the world record for capturing photovoltaic solar energy, achieving a 15.6pc conversion rate with a commercial-grade module.
China is rushing forward with its wind energy plans with the pace surpassing even the most optimistic projections.
After setting an original goal of 30 gigawatts of installed wind power by 2020, the government recently said that could be raised to 100 gigawatts as installed capacity has doubled each of the last four years.
From almost nothing a few years ago, China had 12.2 gigawatts of installed wind power by the end of 2008 as power companies have rushed to meet government mandates to raise the proportion of energy they produce from renewable sources.
With close to 80 percent of China’s energy supplied by cheap but heavily polluting coal, China is now emerging as a world leader in wind energy, with potentially huge benefits for the environment in both China and the world.
“It’s not like people are still talking about wind as a potential future direction. It is already the way forward for a lot of power companies in China,” says Yang Ailun, climate and energy campaign manager for Greenpeace China.
There are about 121 gigawatts of installed wind power worldwide, according to the Global Wind Energy Council (GWEC), with the United States, Germany and Spain the top three wind power nations, followed by China.
