Newsletter
Environmental strategies

Q4 2025

Quarterly report of the fund management

The third quarter was thoroughly positive for equities. Even the seasonally weak month of September was up 3.5% – the strongest September performance in 15 years.  At the moment, everything seems to be working. Note: Please note that an investment in securities entails risks in addition to the opportunities described. Past performance is not a reliable indicator of future performance.

 

The third quarter was also the first quarter in a long time that felt "normal". The fourth quarter of 2024 saw the US elections and their aftermath – with increased volatility. This was followed in Q1/2025 by a rethink of global equity allocation – how should one position oneself given that the world's largest stock market would be pursuing protectionist policies? In Q2/2025, all this culminated in "Liberation Day", when tariffs triggered a "big bang" on the stock markets. All too soon, however, these were gradually watered down or softened.

In contrast, the third quarter was downright boring – volatility on the currency markets was lower (USD/EUR are virtually flat on a quarterly basis), big tech and AI continue to drive the markets, and the headlines coming out of the White House every day are hardly noticed by the market, or only have a sporadic impact on share prices. Interest rates are falling again, earnings growth remains robust and permanent tax cuts are helping companies. 

Political volatility or just noise?

On the political front, the environment remains volatile, driven by "Tweeter-in-Chief" Donald Trump. Political soundbites come out of the White House almost daily, and for our segment, these messages tend to be negative. However, what we pointed out last quarter has come true with the signing of the bill on 4 July – the "One Big Beautiful Bill" (OBBB). The framework conditions set out in the bill show that the environment remains largely positive for clean tech. Of course, the rhetoric and tone remain strongly anti-renewable energy and pro-coal. But what ultimately matters to energy developers is the legal situation. This is regulated in the OBBB and is positive for almost all companies in our universe – or at least less negative than the market had expected.

The continuing negative tone from various government agencies and departments continues to cause uncertainty among many market players, with the result that the topic is still not represented in broadly diversified portfolios. However, when talking to companies, they are quite positive and have delivered strong results over the last two quarters. Nevertheless, no company wants to appear too positive in its quarterly reports so as not to become a political target.

No AI, no party

AI remains the dominant theme on the stock markets. At present, there are no signs that the CAPEX boom could end soon. In a recent interview, Facebook CEO Mark Zuckerberg said that while it would be "unfortunate" if META "mis-invested a couple of hundred billion (!) in data centres", the risk "on the other side was higher".

Note: The companies listed here have been selected as examples and do not constitute investment recommendations.

Economic growth in the US would also look sluggish if AI investments did not save the day. In fact, there would have been no economic growth in the first half of the year if investments in data centres and chips had not been so strong, see Chart 1.  

Chart 1: Real business investment: Data processing equipment and software Source: U.S. Bureau of Economic Analysis; as of October 3, 2025.

What is not yet included in the statistics are related investments, for example in energy to supply the data centres. We identified this as a major driver of electricity demand over a year ago, and this is proving to be true today.

Whether it's Google, Amazon or Microsoft, they are all building data centres and desperately trying to get electricity for them. Facebook recently even opened its own department for trading electricity. However, most hyperscalers are not very sensitive to how much they have to pay for electricity. Their primary concern is to supply their data centres as quickly as possible. "Speed to power" is the magic word, and renewable energy, whether wind or solar, can be brought online faster than gas, coal or nuclear power plants.

The shortage of readily available electricity in the United States is now so extreme that old nuclear power plants are being reconnected to the grid to meet demand – but even these are finite in number. It takes more than four years to restart a decommissioned nuclear power plant and at least ten years to build a new one. Gas turbines currently have a lead time of around five years. In comparison, wind, solar and battery power are often operational within a year – an advantage in a race in which none of the hyperscalers want to fall behind. As long as the boom is financed by cash flow, the biggest risk is a downturn in the stock markets. However, the latest trend in companies such as CoreWeave and Oracle is to finance data centres with debt. This could become a problem in the near future, namely if the expected profits do not materialise, see Chart 2. 

Chart 2: Companies are taking on more debt to finance the AI boom – debt ratio of direct AI stocks
Source: Bloomberg, JPMorgan; as of September 16, 2025. Note: The companies listed here have been selected as examples and do not constitute investment recommendations.

Company in focus - Bloom Energy

Bloom Energy offers a special solution in the area of "speed to power", a technology we already highlighted in our Q4 2024 newsletter. The company is once again in our focus, as its share price has risen by almost 300% since the beginning of the year and by as much as ~720% over the past year! Note: Past performance is not a reliable indicator of future performance.

Bloom Energy offers fuel cells that can be powered by hydrogen, biogas or natural gas. The fuel cells use these fuels to produce electricity through an electrochemical process that reduces air pollution by >99% compared to combustion and reduces CO2 emissions by up to 45%. 

With these fuel cells, data centre operators, for example, can disconnect 100% from the grid and generate their own electricity. This also means that long waiting times for grid connection can be avoided, allowing data centres to become operational more quickly. Compared to the years of lead times for various power sources and the lengthy process of connecting to the grid, Bloom Energy can produce electricity within 90 days of ordering.

The share price recently reacted very positively to announcements that Oracle Cloud had been won as a customer – a real game-changing contract. Winning a data centre tender for over 900 MW in Wyoming also had a very positive effect. As a result, the share is currently trading at a very ambitious valuation level, while big profits are still a long way off. Accordingly, we have reduced our position several times in recent weeks to take profits but remain positive in the long term.

Note: Please note that an investment in securities entails risks in addition to the opportunities described.

Reporting season

Our funds have gained almost 40% since the lows in April, and many investors are wondering whether the rally has already been missed. However, we believe that none of the "generalists" among the market players have yet invested in our segment. The movement we have seen so far has been largely due to short covering which also explains why a broker upgrade (from "sell" to "neutral" or from "neutral" to "buy") can lead to price jumps of between 15-20%. 

Note: Please note that an investment in securities entails risks in addition to the opporunities described. Past performance is not a reliable indicator of future performance.

One example is Array Technologies, which has gained nearly 150% since its lows in April. Despite this rally, the stock is trading at a forward P/E ratio of 13.8 and a free cash flow yield of 8%. In our view, these are still attractive valuations, and we therefore see a positive outlook in the long term. 

It is now important to rebuild investor confidence and deliver consistent earnings performance. The last two reporting seasons went very well for our companies but were hardly rewarded by the market due to political risk. We are cautiously optimistic that the market perception could change now. 

However, it was not up to companies in the energy sector alone who have performed well; the energy efficiency segment and suppliers in the data centre sector are also achieving record results. Admittedly, these companies, such as ABB, Legrand, Schneider Electric, etc., are no longer cheap either (forward P/E ratio > 27). At the same time, however, the growth environment for these companies has not been nearly as positive for a long time – depending on the company, over 20% of sales are already generated in the data centre sector. And in this segment, the rule is: choose a reliable partner who can deliver the data centre infrastructure on time and of high quality. There is enormous competition among hyperscalers in this area, and no one can afford to have a data centre fail because of defective power equipment. 

This gives us an overall picture of our funds, with earnings growing more strongly again but relative valuations becoming more attractive. Now that political risk and the resulting planning uncertainty have decreased significantly, we can once again focus more on fundamentals which should help the comparatively moderate valuations in our segment. 

The (forward) P/E ratio of ERSTE WWF STOCK ENVIRONMENT is 18.3 while that of ERSTE GREEN INVEST is 20.7. By comparison, the broad market is trading at 22.1 and the NASDAQ at 30. Only the Russell 2000 is currently trading at 17. This index also mainly contains companies with small or medium-sized capitalisation, so they react quite sensitively to interest rates in a similar way as do companies in our funds. However, while only 64% of companies of the Russell index will be able to generate profits next year, the ratio for ERSTE WWF STOCK ENVIRONMENT is 87%, for ERSTE GREEN INVEST 95% of companies will turn a profit, according to analysts.

Note: Please note that an investment in securities entails risks in addition to the opporunities described.

Fund alignment

We used the third quarter for tactical positioning. Once the final legal situation regarding renewable energies in the US became clear, we increased our positions in previously heavily sold-off stocks. This enabled us to acquire excellent companies such as Shoals Technologies, Sunrun, Solaredge, Nextracker, as well as companies in the battery segment such as Fluence Energy and energy efficiency stocks such as ABB at attractive prices.

After prices jumped significantly, we took profits towards the end of the quarter on stocks such as the aforementioned Fluence Energy but also Bloom Energy and Nextracker. We continue to like these companies, but their portfolio positions had become too large.

We remain focused on the energy segment, which accounts for the majority of the portfolio in both funds. We see the greatest long-term and structural opportunities here, based on favorable valuations and high earnings growth. In contrast, stocks in the water sector have become very expensive, and there are currently few bargains to be found in recycling either. The regional allocation has changed only marginally. 

Note: Please note that investing in securities involves risks as well as opportunities.

Outlook

As mentioned above, the upcoming reporting season for the third quarter will be decisive for developments until the end of the year. Now that political uncertainty has largely subsided, it will be interesting to see to what extent this is already reflected in rising order numbers for companies.

In addition, we are eagerly awaiting to see how companies assess the rest of the year, but above all their outlook for 2026. The prospect of falling interest rates should also provide support – a key factor for many of our companies. If the majority of companies once again manage to exceed market expectations and interest rates continue to fall, we expect the positive momentum to continue until the end of the year.

Performance opportunities for the funds:

  • Investments in artificial intelligence and thus electricity demand continue to rise
  • Continued strong quarterly figures, refocus on fundamentals vs. political noise

Performance risks for the funds:

  • Trump is using his executive orders and political appointments in various agencies to prevent the expansion of renewable energies
  • Higher inflation figures could at least delay interest rate cuts – this is not currently priced into the market

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 3 October 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 3.10.2025

Overview Erste AM environmental strategies

Source: Erste Asset Management; Data as of 3.10.2025

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.