Providing energy efficient solutions for all?

Cost-effective energy efficiency can achieve environmental benefits at lower costs, and using less energy means fewer emissions produced. Our experts believe there is a compelling investment opportunity within the energy efficiency space.

10 jul 2019

By Bruno Bertocci, Head of the Global Sustainable Equities team and lead Portfolio Manager; Joe Elegante, Senior Portfolio Manager and Alix Foulonneau, Analyst

Energy is central to nearly every major challenge and opportunity the world faces today, including poverty eradication, adaptation to climate change, food security, health, sustainable cities and transport.

Energy demand continues to grow, particularly in emerging markets, due to increasing populations, ongoing urbanization and rising wealth.

Almost 8%

annual growth demand for energy efficient products1

87%

of population has access to energy 2

3 billion

people still cooking with polluting fuel and stove combinations3

Sustainable energy sources like wind and solar receive a lot of press attention but in fact energy efficiency is central to tackling climate change and is often referred to as the best "alternative fuel".

Energy efficiency can be achieved through leaner, smarter industrial processes, energy savings tools as well as energy savvy consumer products.

We believe the driver for energy efficiency is innovation and the prospect of stricter regulation offers long-term opportunities for investors. We expect earnings growth rates for companies offering such products to remain in the high single-digits.

Finding the right investment opportunities

At UBS Asset Management, we find investment opportunities with innovative companies delivering solutions to the world’s most pressing sustainability challenges.

Spectris is one of them and is a leader (typically no.1 or 2) in niche markets in material analysis (34% of 2018 sales), test and measurement (33%), precision instruments (19%), and industrial controls (14%). It has a well-balanced international exposure with a third of sales originated from Asia and Emerging markets.

The business supports the improvement of productivity and efficiency in industrial processes. For example, its monitoring solutions reduce waste in food production lines and its data analytics identify efficiency opportunities for power companies.

Spectris has comfortable gross margins in a market with high barriers to entry but there is room for improvement in operating margins. We expect management to focus on reducing the cost base, simplifying the business and fully integrating past acquisitions to create value.

We first invested in Spectris in November 2017 and it remains one of our top 10 holdings.

  • 34% of revenues originates from materials analysis
  • 33% in test and measurement
  • 19% in-line Instrumentation
  • 14% in industrial controls
  • A third of sales in Asia and emerging markets.

Investment opportunities from energy efficiency

  • Energy is crucial for our society. It is in the products we consume every day and drives our economy
  • Improved energy efficiency is an opportunity to limit the demand growth for energy
  • A key business factor for an increasing number of companies and should see above-average sales and earnings growth in the decades to come
  • Addressing an enormous challenge humankind faces enabling investors to support the UN Sustainable Development goals.

UN SDG Goal 7

Ensure availability and sustainable management of water and sanitation for all.

Goal 7 of the United Nations Sustainable Development Goals is aimed at ensuring access to affordable, reliable, sustainable and modern energy for all.

Goal 7.3 target: By 2030, double the global rate of improvement in energy efficiency

It is at the very core of sustainable development and one step closer due to recent progress in electrification, particularly in the least developed countries, and improvements in industrial energy efficiency.

However, national priorities and policy ambitions still need to be strengthened to put the world on track to meet the energy targets for 2030.

Spectris

Enhancing instrumentation and controls – here's an example of how their instrumentation is used to drive improved energy efficiency.

Drax Power's use of Spectris Servomex analyzers to optimize boiler combustion efficiency has saved them millions of pounds in direct fuel savings and lower operational costs.

Drax Power is the UK’s largest power station and is Europe's biggest decarbonisation project. Seventy per cent of its electricity is generated from sustainable biomass.

Important legal information

To proceed, please confirm that you are a professional / qualified / institutional client and investor.

Views and opinions expressed are presented for informational purposes only and are a reflection of UBS Asset Management’s best judgment at the time a report or other content was compiled. UBS specifically prohibits the redistribution or reproduction of this material in whole or in part without the prior written permission of UBS and UBS accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions contained in the content of this webpage have been compiled or arrived at based upon information obtained from sources believed to be reliable and in good faith but no responsibility is accepted for any errors or omissions. All such information and opinions are subject to change without notice but any obligation to update or alter forward-looking statement as a result of new information, future events, or otherwise is disclaimed. Source for all data/charts, if not stated otherwise: UBS Asset Management.
Any market or investment views expressed are not intended to be investment research. Materials have not been prepared to address requirements designed to promote the independence of investment research and are not subject to any prohibition on dealing ahead of the dissemination of investment research. The information contained in this webpage does not constitute a distribution, nor should it be considered a recommendation to purchase or sell any particular security or fund. The materials and content provided will not constitute investment advice and should not be relied upon as the basis for investment decisions. As individual situations may differ, clients should seek independent professional tax, legal, accounting or other specialist advisors as to the legal and tax implication of investing. Plan fiduciaries should determine whether an investment program is prudent in light of a plan's own circumstances and overall portfolio. A number of the comments in the content of this webpage are considered forward-looking statements. Actual future results, however, may vary materially. Past performance is no guarantee of future results. Potential for profit is accompanied by possibility of loss. 
© UBS 2020 The key symbol and UBS are among the registered and unregistered trademarks of UBS.

Reset