ISSUE #11: May 2, 2019
We Couldn’t Have Said it Better Ourselves
We don’t often point our readers to publications from our competitors, but GMO has recently published a white paper that we found to be worthy of such reference. Thinking Outside the Box: How and Why to Invest in a Climate Change Strategy, written by Lucas White and Jeremy Grantham, is a great summary of the benefits to investing in thematic strategies such as Essex’s Global Environmental Opportunities Strategy (“GEOS”). As noted, such strategies provide “diversification, protection from climate risk, inflation protection, and the potential to buy growth-oriented companies at a discount.” The authors conclude, “We are rapidly approaching a time when the world will be forced to act aggressively in an attempt to overcome decades of inaction. As return-oriented investors, we see this effort providing the backdrop for decades of secular growth in the climate change sector, along with the potential for strong returns.” We wholeheartedly agree.
Elon Says 2020…We Say No Way
Tesla recently hosted an analyst event highlighting the company’s autonomous driving technology, which Elon Musk declared would be available in Tesla automobiles by the end of 2020, “at the latest.” Of course, there are plenty of other companies also working on autonomous driving technology, including Waymo, Uber, GM and Aptiv (currently owned by Essex) and industry experts suggest that Tesla’s technology is not the most advanced of the bunch. Clearly this is a significant technology that will enhance safety, productivity and resource efficiency, yet sizeable hurdles remain before wide-scale commercial roll-out of fully autonomous driving technology. In our opinion, the timeline for fully autonomous driving has actually been pushed out given what we have learned from some of the efforts in the past year. MIT technology review has recently published an article highlighting some of the challenges with this technology.
Next Generation Electric Vehicles?
All of the current electric vehicle (“EV”) offerings are fueled by some form of lithium ion batteries. General thinking in the industry is that due to the high cost of advanced battery technology and the investment that has been made in manufacturing capacity for lithium ion batteries, there won’t be a credible alternative battery technology for use in electric vehicles for close to a decade. Electric car company Enovate, based in China, claims that they will be able to manufacture an EV using solid state batteries within the next two years. This seems to be an ambitious timetable, but such an achievement would have a profound effect on both the car and battery industries.
Hedging Their Bets
We have pointed out here before a number of investments in various clean technologies by some of the large fossil fuel companies, particularly by some of the recent European based oil majors. Royal Dutch Shell is one such company that has been increasing its recent investments in clean technologies that can lead to new business opportunities for Shell as the world transitions to a less carbon intensive economy. A recent interview with Royal Dutch Shell’s New Energy Director is an interesting read.
Beyond Petroleum Re-boot
BP, the British integrated oil company developed the tag line “Beyond Petroleum” in 2000 to position itself as environmentally-friendly. To reflect the new direction, the corporate logo was changed to a green and yellow sunburst and a $200 million PR campaign was launched. BP was then widely-owned as a best-in-class oil company in many SRI portfolios. BP’s esteemed environmental image is now considered a strong example of greenwashing after the 2010 Deepwater Horizon oil spill, the result of poor operational procedures and corporate governance. As the solar industry boomed in the mid-2000s, BP did play a role, as it invested in solar panel production facilities employing over 1,700 workers. However, when the industry contracted in 2011 amidst subsidy cuts, brutal competition and falling prices, BP divested this business…just about at the bottom of the market and just prior to a significant recovery in the global solar market. More recently, as an indication of the mainstreaming of the solar market, BP announced recently it is in talks to run its U.S. operations on solar energy, through a partnership with Lightsource BP. Lightsource is a solar developer which formed a JV with BP in 2017. Maybe now that solar has mainstreamed, BP can indeed move beyond petroleum:
You should carefully consider the Fund's investment objectives, risks and charges and expenses before investing. This and other important information is contained in the Fund's prospectus and summary prospectus, which should be read carefully before investing. To obtain a fund prospectus or summary prospectus, call (800) 700-9929. The Fund is distributed by Ultimus Fund Distributors, LLC.
Investing involves risk, including loss of principal. There is no guarantee that the fund will meet its investment objective. Because the Adviser's GEOS criteria exclude securities of certain issuers for non-financial reasons, the Fund may forego some market opportunities available to funds that do not follow the environmental themes inherent in the GEOS strategy.
As of 3/31/19, the Fund's top ten holdings are Kornit Digital Ltd (5.42%), TPI Composites Inc. (4.07%), Sunrun Inc. (4.03%), Trimble Inc. (4.00%), Xylem Inc. (3.82%), Watts Water Technologies, Inc. (3.74%), Lindsay Corp. (3.46%), Keyence Corp. (3.44%), Cognex Corp. (3.34%) and Raven Industries Inc. (3.11%).
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