Newsletter
Environmental strategies

Q2 2025

Quarterly report of the fund management

This quarterly newsletter should actually be about what happened in the first quarter. However, the US administration led by Donald Trump chose April 2nd for its "Liberation Day". The tariffs announced there are important to discuss because they could fundamentally change the global economic system as we know it. Not only did the announced tariffs turn out to be much higher than expected, but the calculation methodology and the justification for them also seem far-fetched. 

 

The stock markets reacted very negatively to Trump's announcements, with the US stock market initially correcting by over 10%. The "Economic Policy Uncertainty Index", which reflects the uncertainty surrounding economic policy, was at its highest level since the COVID pandemic. And the crazy thing is: all of this is driven by one nation, in reality by one person - Donald Trump.

Apparently, America's position as the global hegemon with the strongest economic performance and the US dollar as the reserve currency was not good enough for Trump.  People would like to see an industrial renaissance in which the majority of the American population works in the manufacturing sector again. A wish that is unlikely to materialise - if industry does come back, it will largely be with automated factories and fewer jobs. The tariffs will plunge the USA into a recession, fuel inflation and ultimately lead to layoffs. Added to this are the expected reactions of trading partners, who, as has already been seen, will respond with counter-tariffs

Basically, the tariffs should not have come as a big surprise, as Trump promised them non-stop during the election campaign and even said that "tariffs" was the most beautiful word in the English language.  Until the very end, however, market observers and analysts did not expect him to actually realise his announcements. Even Republican political experts reckoned that more level-headed forces would prevail and that Trump's election promises would not become reality. But the rational voices in the White House were either no longer there or simply not being heard.

There is a consensus in economic circles that tariffs will have a negative impact on the global economy. On the one hand, the price increases are passed on from the importer to the end customer, which has an inflationary effect. On the other hand, the countries affected react with reactionary tariffs, which ultimately escalates into a major trade war: one side raises tariffs, the other reacts - and so on. What makes this all the more astonishing is that it was a completely "unforced step", which is currently leading to one of the most volatile phases for the stock market in a long time. In the past it has taken unpredictable crises to generate such market reactions, this time it was a pre-announced and orchestrated press conference from the most powerful man in the world. 

Market overview

The US markets reacted with the worst 2-day performance since the COVID crisis, with the S&P down -10.5% in two days and the NASDAQ even down -11.1%. It is one of the fastest and sharpest price corrections we have ever seen. But even before the tariff announcements, the USA was already underperforming the rest of the world, especially Europe. The STOXX Europe 600 gained +5% in the first quarter, while the S&P 500 lost over 5% - Europe's biggest relative outperformance in over two decades!

The Trump administration initially showed a certain nonchalance towards market reactions and the economic downturn - the motto now is "short-term pain, long-term gain". There seemed to be a consensus in government circles that the current system needed to be cleaned up before the "golden age" of the USA could be ushered in. If this required a recession, they were prepared to accept it. Or were they? The 180-degree turnaround on April 9 with the suspension of tariffs for 90 days is indicative of the unpredictability of the US president and the actual impact. For investors, this means that the risks have increased, if only due to the enormously high market volatility and the general uncertainty. Companies no longer have much planning certainty; investments are at risk of being postponed and location decisions could be put on hold for the time being. The longer the Damocles sword of tariffs hangs over the markets, the more negative the impact will be on companies and ultimately on profits.

As is well known, Trump's modus operandi is to negotiate deals and build up as much pressure as possible on his counterpart beforehand. It is quite possible that the widely announced tariffs will ultimately all be renegotiated or removed and that various countries will make concessions to the US. However, if there are no deals in the near future, the situation on the stock markets will remain tense and highly volatile - the full impact of the tariffs currently seems to be priced in or out on an almost daily basis.

Growing support among Republicans for the Inflation Reduction Act

Political uncertainty is making itself felt in all areas of the stock market - the clean tech sector is no exception. Above all, the subsidies that have come via the Inflation Reduction Act are under discussion. Except for the expected cuts in the offshore wind and electromobility sectors, very little concrete information has been heard on the subject. But the Trump administration will attempt to extend the tax breaks for high earners and companies - and savings are needed for this.

So far, there are no clear trends on the budget in Washington, with contradictory reports from analysts and insiders appearing almost on a weekly basis. As reported, many Republicans had already spoken out in favor of the Inflation Reduction Act before the election, as it created numerous jobs in their respective states.  After the election, the number of (public) supporters of the IRA rose again, from 18 to 21 Republicans (in the House of Representatives). Conversely, this means that the Republicans in the House of Representatives would no longer have a majority in the event of a vote. Abolition of the IRA is therefore not uncontroversial within the party.  It is also a fact that the USA is in a phase of growing demand for electricity - all forms of energy will play a role here, including renewables. 

Company in focus - First Solar

The political competition between China and the USA has also been taking place in the solar segment for some time now. Various tariffs on solar cells and modules from China have been in place since 2012 - these amount to up to 200%. In 2024, tariffs were also imposed on solar cells and modules from Chinese companies that have outsourced their production to countries such as Cambodia, Malaysia, Thailand and Vietnam. In the case of Vietnam, these even amount to 271.45%! 

In response to the large number of trade barriers, many American companies in the solar sector have already brought most of their value chains back to the USA - the IRA has even incentivized this step with its own tax credit to create incentives for these companies. The so-called "Domestic Content Tax Credit" is popular with Republicans and Democrats alike and is in line with the current administration's goals of bringing manufacturing back to the US.

The prime example of this is First Solar, the largest producer of solar modules in the USA. Most of the production takes place in the domestic market, supporting over 16,000 jobs in the United States. Virtually the entire value chain takes place in the US, from glass from Ohio, Pennsylvania and Illinois, tellurium from Utah to steel from Alabama and Louisiana. Thanks to its own production process, the company is not dependent on Chinese imports, unlike its competitors. The company recently expanded in Alabama and will complete its plant in Louisiana this year - at full capacity, over 4,000 employees will work in First Solar's factories, and it will indirectly support 30,000 jobs in the USA via - and as an interesting detail on the side - the majority of these are in Republican states. 

First Solar has been benefiting from US protectionism in the solar sector for some time - so it makes sense that the stock is holding up better in the current environment. However, the big question mark here is also the future of the IRA - as an American producer, the company benefits greatly from the tax incentives. Earnings per share in 2024 were just under 12 Dollar; without the IRA, earnings would have been just 4 Dollar. For 2025, analysts expect earnings of 18 Dollar per share (6 Dollar without the IRA). We do not expect the IRA to be completely abolished. As just mentioned, many parts of the law are also widely supported by Republicans - bringing production capacities back to the USA should also be in the interests of the Trump administration. First Solar is also one of the top holdings in our funds.

Disclaimer: The company listed here has been selected as an example and does not constitute an investment recommendation.

First Solar panels are a prime example of ‘Made in America.

Source: First Solar; Note on the graphic: Forecasts and past performance do not allow reliable conclusions to be drawn about the future performance of the funds mentioned.

Company reports

The past quarter again brought mixed earnings. Although the figures delivered were largely good, the outlook was clouded by political uncertainty. As always, there were also positive and negative outliers. Sunnova, for example, reported negatively and we sold it completely. The company had to cut its outlook and question its ability to continue as a going concern.

Nextracker was once again a positive surprise, delivering another "beat and raise", i.e. better figures than expected and a better outlook. Since the company went public in 2023, it has consistently exceeded analysts' estimates - the share price rose by over 20% following the numbers. In a volatile environment, the share price is lower at the time of writing than before the strong figures and is trading at a P/E ratio of 10 and a free cash flow (FCF) yield of over 9%. The company has no debt and has already announced that it will let shareholders participate in its future success in the form of dividends or share buybacks. Nextracker is one of our top holdings in the fund. 

Disclaimer: The company mentioned here has been selected as an example and does not constitute an investment recommendation.

Steering the portfolio

We have used the distortions of the reporting season to buy companies that we believe are attractively valuated. For example, we have increased our weighting in Shoals Technologies & Array Technologies. Shoals Technologies is trading at a P/E ratio of 8 and an FCF yield of 13%. Array Technologies is trading at a P/E ratio of 9 and an FCF yield of 22% (!). Both companies are hardly affected by tariffs as most of their production and value creation takes place in the USA; in the case of Shoals, 90% of the materials for production are purchased from the USA.

HA Sustainable Infrastructure (HASI) trades at a P/E ratio of 10 and a dividend yield of just under 7%. The outlook for earnings growth of 8-10% until 2027 has been confirmed here - the dividend has recently risen by an average of 4% per year. The company has been active in the renewable energy sector for over 30 years and is actually a safe haven in uncertain times - but has also been punished by almost 20% in the current market turbulence. HASI is already one of our largest positions in the fund, but we will continue to use setbacks to expand the position.

Our segment was also unable to escape the sell-off and performed similarly to other global markets. While individual stocks in the industrial sector and the water segment held up better, it was mainly stocks in the energy sector that performed worse.

As mentioned, the weightings in stocks that are less affected by tariffs have increased. This primarily relates to stocks in the water sector, but also to more defensive energy suppliers or waste companies, that generate most of their sales in their domestic market and are therefore less affected by trade barriers. These include companies such as EDP Renovaveis, Acciona Energia, American Water Works, Republic Service Group and Waste Management.

Disclaimer: The companies listed here have been selected as examples and do not constitute an investment recommendation. Please note that investing in securities involves risks as well as opportunities.

Outlook

Current developments could lead to an upheaval of the post-war world order as we know it. Should Trump actually lead the USA down an isolationist path, this would have fatal and long-term consequences for the global economic structure. However, even as Trump recently postponed the announced tariffs once again, a lot of damage has already been done. It is almost impossible for companies to plan or make investment decisions in such an environment. The US is clearly trying to shed its status as a reliable trading partner, world police and global hegemon.

Other countries, above all China, will try to fill this gap. Volatility and uncertainty will remain high. However, every crisis always offers opportunities. We have recently seen increased activity from strategic investors and private equity in the renewable energy sector. In February, for example, the Quebec pension fund made a takeover bid for Innergex Renewable Energy - at a premium of 58% to the last share price.

Brookfield Asset Management also recently announced several major deals in the renewable energy sector. In February, the onshore renewable segment of National Grid was purchased for 1.7 billion Dollars. Ignacio Paz-Ares of Brookfield Asset Management said: "We believe that the fundamentals for renewable energy are stronger than ever... the current disconnect between the market noise and the fundamentals gives us a very good opportunity to make acquisitions at very attractive prices".

KKR, one of the largest private equity firms in the world, is currently raising almost 7 billion Dollars for its first "Global Climate Fund". "The geopolitical factors that are putting pressure on company valuations offer an attractive entry point for long-term investors" (quote from Vincent Policard, Partner & Co-Head of European Infrastructure, KKR). While this is KKR's first fund in the renewable energy sector, Copenhagen Infrastructure Partners (CIP) has a long track record in this segment. In March, CIP launched its largest renewable energy fund to date - with an investment volume of 12 billion Dollars. Over 60% of the money is already committed, from offshore wind in Taiwan to battery projects, solar and wind in the USA. "It's a really, really good market or time be a buyer of renewable energy projects," said CIP co-founder Jakob Baruel Poulsen.

This activity in the renewables sector makes us confident. The market is still booming, even if this is still not reflected in the stock prices. Investors with a long-term investment horizon can take advantage of this situation. 

Disclaimer: The companies listed here have been selected as examples and do not constitute an investment recommendation. Please note that investing in securities involves risks as well as opportunities.

Performance opportunities for the funds:

  • Funds lower US exposure compared to global indices can help in a multipolar world
  • Due to the political hiccups in the USA, the abolition of the Inflation Reduction Act is less in focus

Performance risks for the funds:

  • Increased political risk - Trump's tariffs risk a severe recession and a shift in global supply chains
  • Increased uncertainty - companies will suspend their guidance and postpone investments

Overview Performance

ERSTE WWF STOCK ENVIRONMENT

Note: Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A20DU5 = Distributing share (A)
AT0000A20DV3 = Accumulating share (VT)

Retail share classes

AT0000705660 = Distributing share (A)
AT0000A03N37 = Accumulating share (VT)

ERSTE GREEN INVEST

Note: Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A2KVV7 = Distributing share (A)
AT0000A2KVW5 = Accumulating share (VT)

Retail share classes

AT0000A2DY42= Distributing share (A)
AT0000A2DY67 = Accumulating share (VT)

Overview performance contribution in %

ERSTE WWF STOCK ENVIRONMENT

Best & worst performer

ERSTE GREEN INVEST

Best & worst performer

Source: Erste Asset Management, FMP, data as of 10 April 2025; gross performance data (before deduction of management fee) *Contributions determined at fund and allocation level; the above portfolio positioning may change at any time as part of active management. 

Fund management

Clemens Klein

Lead-Manager ERSTE WWF STOCK ENVIRONMENT

... is a Senior Professional Fund Manager in the equity team of Erste Asset Management. He has been investing since 1992. At the beginning of his career, he was an investment specialist and portfolio manager at Erste Bank. He then moved to ERSTE-SPARINVEST KAG (formerly a subsidiary of Erste Asset Management) in 2005. Initially, he focused on managing US equities as part of the Developed Markets Equities team before specialising in the management of sustainable equity funds in 2011. He is currently the lead manager for a range of global sustainable equity strategies with a focus on impact.

Alexander Weiß

Lead-Manager ERSTE GREEN INVEST

...has been a fund manager in the equity team at Erste Asset Management since July 2021. He is the lead manager of the ERSTE GREEN INVEST mutual fund. In addition, he is co-manager of the mutual funds ERSTE WWF STOCK ENVIRONMENT, ERSTE STOCK ENVIRONMENT, and a special fund mandate that takes advantage of opportunities in the area of climate change.

Disclosure, taxonomy & labels

Source: Erste Asset Management, Data as of 10.4.2025

Overview Erste AM environmental strategies

Source: Erste Asset Management; Data as of 28.2.2024

Contact us

Personal contact with you is particularly important to us.
If you have any questions about our investment solutions, our team will be happy to help you.

E-Mail: institutional@erste-am.com

General information on the funds mentioned

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. All data is sourced from Erste Asset Management GmbH, unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to Art 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the  website www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the website www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund. Please note that investments in securities entail risks in addition to the opportunities presented here. The value of shares and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your shares. Persons who are interested in purchasing shares in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to Art 21 AIFMG for restrictions on the sale of fund shares to American or Russian citizens. Misprints and errors excepted.

The public sale of shares in the specified fund in Germany was registered with the Federal Financial Supervisory Authority, Bonn, pursuant to the German Kapitalanlagegesetzbuch (KAGB). The issue and redemption of unit certificates and the execution of payments to unit holders has been transferred to the Fund's custodian bank/depositary, Erste Group Bank AG, Am Belvedere 1, 1100 Vienna, Austria. Redemption requests can be submitted by investors to their custodian bank, which will forward them to the Custodian Bank/Depositary of the Fund for execution via the usual banking channels. All payments to investors are also processed via the usual banking clearing channel with the investor's custodian bank.. In Germany, the issue and return prices of shares are published in electronic form on the website www.erste-am.com (and also at www.fundinfo.com). Any other information for Shareholders is published in the Bundesanzeiger, Cologne.

Presentations:

It is expressly noted that presentations shall not be construed as providing investment advice or investment recommendations; presentations simply represent the current market opinion. The presentations are not intended as sales instruments and shall therefore not be construed as an offer to buy or sell financial or investment instruments. The investor shall be solely responsible for any and all decisions that he makes on the basis of this presentation.