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Reducing emissions provides new investment opportunities

Currently there are many initiatives in different industries to find innovative ways of reducing emissions. These new solutions also provide new investment opportunities for our fund DNB Renewable Energy.

Finance Blog

Jon Sigurdsen

Jon Sigurdsen is lead portfolio manager for DNB Asset Management's long/short and long-only renewable energy strategies. He joined DNB Asset Management in 2005. The first two years he spent as a member of the global technology team before he was appointed portfolio manager for the renewable energy strategy in 2007.

Jon began his career in Nordea Securities as a sell-side equity analyst covering the TMT sector. He later went on to assume the same role in Carnegie Securities before joining DNB Asset Management.

Jon holds a BA in Business from Liverpool John Moore's University, England.

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The Fund DNB Renewable Energy has recently participated in two IPOs, we consider these companies particularly innovative in addressing reduction in greenhouse gas emissions.

At present these investments are small, but if they succeed, we believe they have great growth potential. We will consider larger investments in the portfolio in the longer term.

Traditional cement production is a massive source of emission

Hoffmann is one of the new companies we have invested in. They have a new and enhanced proprietary process for the production of cement, that removes the part which causes most of the CO2-emissions.

Emissions in this industry account for as much as seven percent of greenhouse gas emissions globally. The cement market is large and cement is an area that is difficult to play in the stock market. However, we believe this company has an interesting angle and may very well change how cement is produced in the future. By changing the process Hoffman reduces emissions by around 80 percent compared to conventional Portland cement production, without sacrificing product features!

Upcoming regulations on allowable emissions will probably also strengthen the company's competitive position. Both in terms of cost and requirements, they are well-positioned. The company has already established a track record in terms of production, and they have signed sales contracts on attractive terms. We expect them to commercialize the business further swiftly.

Only recently we met the management of Hoffmann and visited their factory near Nantes. We were impressed! We saw that an old industry, that has barely evolved over the last 200 years, can be modernized with technology and automation.

Cement Factory in Norway
The cement producing industry accounts for as much as seven percent of greenhouse gas emissions globally. New and environmentally friendly production methods are of great interest for our DNB Renewable fund, says Jon Sigurdsen in this comment. (Credit: NTB/VG)

A new and cleaner heat source is created by emerging existing technology

The other company I’d like to tell you about is BoostHeat. They have developed a new technological solution in the boiler market. Their solution combines heat pump and gas technology. The result is high heat pressure which is very energy efficient. Their solution is exceptionally environmentally friendly (energy labeling A ++).

BoostHeat initially targets the French, German and Swiss markets. Their distribution model is to partner up with several existing distributors in these large markets. We think the partnerships will give them faster market access than they would have gained independently.

The company's management has also previously shown the ability to build new companies and thus create additional shareholder value by selling at a good price as they mature. Given BoostHeat’s strong patent position, and the ability to commercialize the product, we believe the management of BoostHeat may succeed again.

New and more sustainable solutions are emerging

In addition to Hoffman and BoostHeath, we also see a lot of positive initiatives in the companies we’re already invested in. In particular, I’d like to point out an interesting trend in the beverage packaging market.

We now see that the use of aluminum in the packaging market is increasing significantly. Coca Cola, Pepsi Cola, and Danone have all recently introduced water in aluminum packaging as they want to meet the demand for more environmentally friendly alternatives to plastics.

In our opinion aluminum is a strong candidate to replace steel and plastic in the future. Aluminum can be recycled indefinitely and the consumer is already familiar with returning the packaging. It is also our belief that the market will be tight and prices and margins will go up.

A company named Constellium is one of the companies we believe can take advantage of this trend soon, both in terms of volume and margins. Originally we invested in the company because of their aluminum solutions towards the transport markets, more specifically the electric car market. However, Constellium also has the solutions and capabilities to serve the growing demand for aluminum packaging.

All in all, there are a lot of interesting initiatives now within renewable energy and smarter production, and we are following these developments closely.


Disclaimer: Nothing contained on this website constitutes investment advice or other advice, nor is anything on this website a recommendation to invest in our Funds, any security, or any other instrument. The funds mentioned may not be available in the markets you represent. The information on this blog is posted solely based on sharing insight to make our readers capable of making their own investment decisions. Should you have any queries about the investment funds or markets referred to on this website, you should contact your financial adviser.

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