Newsletter
Environmental strategies

Q3 2026

Quarterly report of the fund management

Back to the future: electricity is becoming a bottleneck again

Perhaps the most important issue in the environmental technology sector at present is the global race for electricity. More specifically: the question of where the enormous additional demand for electricity in the coming years can be sourced from, how quickly it can be fed into the grid, and which companies stand to benefit. What sounded like a long-term infrastructure issue just a few quarters ago has very quickly become a very concrete investment theme as a result of the AI boom. This is most evident in the US – investment in the construction of AI-related data centres, computing hardware and network equipment accounted for around 0.8 per cent of US GDP in the first quarter of 2026, driving total IT infrastructure expenditure to around 1.5 per cent of GDP – compared with an average of around 0.7 per cent over the period 2015 –2022.

However, data centres, artificial intelligence and electrification are also transforming the energy market. For a long time, electricity demand in many developed economies was characterised by moderate growth or even stagnation. Now, for the first time in decades, we are seeing a significant surge in demand - not only with chips, servers or software, but increasingly with energy. Available capacity, grid connection, transformers, storage and cooling are all necessary to bring a data centre online as quickly as possible. However, speed remains a major ‘bottleneck’ in implementation. We first reported on this topic around two years ago, highlighting one of the main beneficiaries in the sector – Bloom Energy. With rising energy demand and the fierce race between the hyperscalers, ‘speed to power’ has become even more important today.

Whilst the US has the better AI models, China is more successful and quicker at bringing new electricity onto the grid. This is linked to the fact that China has been in a growth phase for decades, during which physical demand for electricity has risen steadily, whereas in the US – after 25 years of stagnation – this is still a comparatively new issue.

Nuclear power and gas will remain part of the debate, but they require time, permits and infrastructure. Solar, wind, batteries, grids and decentralised solutions, on the other hand, can in many cases bring power online more quickly. This is precisely what matters from an investor’s perspective.

The energy crisis following Russia’s attack on Ukraine was already a wake-up call for Europe. The recent geopolitical tensions surrounding the Middle East have brought this realisation into even sharper global focus. Dependence on imported fossil fuels is not just a climate issue, but an economic and geopolitical risk. In this context, domestic, scalable and more readily available energy sources are becoming increasingly important.

In the US, too, the picture is more nuanced than the political headlines would suggest. The rhetoric surrounding renewable energy remains harsh, but the economic reality tells a different story. A large proportion of the investment under the Inflation Reduction Act has gone to Republican states. At the same time, grid infrastructure is increasingly being recognised as critical infrastructure – on 20 April, the Trump administration announced that the electricity grid would henceforth be a matter of national security. As part of the Defence Production Act, the aim is to ramp up local production of critical components. This means that transformers and substations have reached the same strategic level as military equipment and can therefore be actively prioritised and supported by the US.

 Note: Investments in securities involve risks as well as opportunities.

Transformers: age of capital costs

At a corporate level, this development is already becoming apparent: demand for grid components and electrification solutions is booming. Transformers have recently become a physical bottleneck that can slow down the expansion of data centres and grid infrastructure. Lead times for grid transformers have risen from around one year (2021) to up to five years (today) (see chart 1). Even though companies are investing in additional production capacity, the current bottleneck is ensuring full order books and strong margins.

Chart 1: Grid equipment lead times have increased in recent years

The most powerful transformers in the high-voltage sector are, in practice, dominated globally by three companies – Siemens Energy, Hitachi and GE Vernova. All three are represented in ERSTE GREEN INVEST and business is booming. After years of stagnating electricity demand, we are now in a phase of expansion – the IEA estimates that investment in electricity grids must rise from the current ~USD 400 billion per annum to ~USD 600 billion. Added to this is the fact that electricity grids worldwide are ageing – according to the European Commission, 40 per cent of distribution networks in Europe are over 40 years old, and the situation in the US is not much better.
This combination of upgrading old infrastructure and expanding new lines results in enormous pricing power which can currently be passed on very effectively, as the end customer (i.e. data centres) is not price-sensitive (see chart 2).

Chart 2: Grid equipment price increases have outpaced broader inflation

Source: FRED, Lawrence Berkeley National Laboratory(https://neiscenter.substack.com/p/seizing-americas-supply-chain-opportunity)

This tailwind does not appear to be a short-term phenomenon, judging by the investment plans of the major grid operators. This is clearly illustrated by the example of TenneT, a grid operator in the Netherlands and Germany: in 2021, it had invested around EUR 4 billion. The plan for 2025–2034 envisages a total of EUR 200 billion, or EUR 20 billion per year! A similar picture can be seen across Europe and the US – huge investments by grid operators and utilities which are generally known for taking a very conservative approach.  

New momentum among utility companies

Nextera Energy, the largest listed utility company in the US, announced last quarter that it would acquire Dominion Energy, the largest utility in the state of Virginia. The deal is valued at approximately USD 67 billion. If the takeover is approved – which is to be expected given the current political climate in the US – it will result in the creation of the world’s largest regulated energy utility. The strategy behind the deal is clear: Dominion Energy operates in Virginia which has the highest density of data centres in the world. The so-called ‘Datacenter Alley’ stretches out in the immediate vicinity of the capital, Washington D.C. – and of course, operating these data centres requires a great deal of electricity. Nextera, as the largest developer of renewable energy in the US, fits perfectly into this picture and can meet this enormous demand. The merger will create an energy giant with a market capitalisation of around USD 420 billion. 

Positioning & Outlook

The environmental technology sector is increasingly coming to represent the future of data and energy infrastructure. Anyone who takes AI, reindustrialisation and energy security seriously must also consider electricity, grids, storage and renewable energy. In our view, this is precisely where the core of the investment story lies.

However, climate protection also remains a key issue – in Austria, we set a new record in the second quarter, with 157 out of 277 weather stations recording all-time high temperatures for June.  The heatwave in Vienna was the most severe ever recorded. At these temperatures, not only do sleep duration and efficiency decline, but work productivity and children’s ability to concentrate at school also suffer.

The impact is also evident in the real economy: Eurostar, the well-known rail operator active in the UK and Western Europe, has recently ordered trains capable of operating at outside temperatures of 55°C. Due to longer and more extreme heatwaves, preparations are therefore being made for temperatures more commonly associated with Saudi Arabia than with Europe.

For the coming quarter, our environmental technology funds remain clearly focused on the structural growth drivers of the energy transition. In the ERSTE GREEN INVEST fund, the emphasis remains firmly on the energy sector, accounting for 64.7 per cent, followed by transformation, recycling, water and adaptation. In the ERSTE WWF STOCK ENVIRONMENT fund, the allocation to the energy sector is similarly high, with renewable energy accounting for 39.8 per cent and energy efficiency for 26.7 per cent; this is complemented by water, recycling, energy storage and mobility.

In recent years, our sector has been heavily influenced by interest rates, politics and short-term disappointments. These factors remain relevant, particularly if inflation and yields rise again. However, what we believe is not yet fully reflected in share price performance is the structural nature of the new demand for electricity. Data centres, electrification and grid expansion are not short-term fads; they reinforce one another.

Note: The portfolio allocations shown reflect market conditions as of July 20, 2026. These allocations are subject to change as part of active management and in response to market movements.

Performance opportunities for the funds:

  • The rising demand for electricity is no longer driven solely by traditional electrification, but increasingly by AI data centres, the relocalisation of critical infrastructure and the desire for energy autonomy.
  • Grids, transformers and power equipment are taking centre stage: what was long regarded as rather dull infrastructure has suddenly become the bottleneck for the market’s most important growth story.

 

Performance risks for the funds:

  • Not all clean-tech segments are benefiting equally: residential solar, individual project developers, offshore wind and hydrogen remain challenging in select areas. This quarter was not one where ‘everything went up’ but was clearly characterised by stock picking.
  • Some AI companies have seen their equity prices surge: the strong price performance of certain beneficiaries of the electricity and data centre boom makes discipline regarding position sizes and profit-taking essential.

ERSTE WWF STOCK ENVIRONMENT carries the LuxFLAG Impact Label since January 2026.

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 30 June 2026; 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 and ERSTE STOCK ENVIRONMENT.

Disclosure, taxonomy & labels

Source: Erste Asset Management, Data as of 30 June 2026

Overview Erste AM environmental strategies

Source: Erste Asset Management; Data as of 30 June 2026

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.

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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  web site 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 fund prospectus or the Information for Investors pursuant to Art  21 AIFMG and the Key Information Document are available, and any additional locations where the documents can be obtained can be viewed on the web site 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.

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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.

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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.