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Environmental strategies

Explanation: The inverted blue line shows the rise in interest rates compared with the fund’s price performance. When interest rates rise, this weighs on the fund’s performance. Since the infamous ‘Liberation Day’, this correlation has weakened, reflecting the greater resilience of the companies in the fund to rising interest rates.  

AI trading meets physical reality

For us, one of the most significant developments of the quarter was the growing debate surrounding new data centres in the US. Until recently, many states were competing to attract as many of these projects as possible. Now, the key question is more often: where does the electricity come from – and who pays for the necessary infrastructure? New York has imposed a moratorium on new hyperscale data centres, whilst in Texas, permits have also been temporarily suspended. The political message is similar: new large-scale consumers should bear the infrastructure costs they incur themselves. We interpret these measures as a sign that the pace of AI expansion is increasingly coming up against the limits of the existing energy infrastructure. The key bottleneck is, more often, the availability of electricity and grid connections. This is fundamentally positive for our investment case, as demand for power generation, storage, grid technology, transformers, cables and energy management is rising.

Following the US mid-term elections, the debate is likely to be shaped more by specific infrastructure and financing issues than by general moratoriums on approvals. The message is likely to be increasingly: “You can build – but bring your own power and pay your own way”. The more the costs of additional power generation and infrastructure are directly passed on to large-scale consumers, the more closely the KI capex cycle will be linked to the expansion of physical energy infrastructure.

The power trade faces a reality check

This uncertainty was quickly priced in on the stock market. Companies that had previously benefited particularly strongly from the narrative of rising AI electricity demand came under considerable pressure at times. This brings us full circle to the discrepancy mentioned here between share price performance and corporate performance. At the same time, some of the weakest companies reported rising order intake, high order books or improved margins.

This is precisely why differentiation remains important – whilst grids, transformers, power generation and industrial electrification continue to benefit from very high demand, the picture is significantly more challenging in the US residential solar market, for example. SolarEdge and Enphase were again among the weaker performers last quarter. Positive contributions, by contrast, came from sectors such as grid expansion and energy infrastructure.  
 
This highlights a point that is important to us: the environmental technology sector is now much more broadly based and no longer consists exclusively of the solar and wind industries. The investment story ranges from grid infrastructure and power generation, through energy efficiency and building services, to recycling, water, mobility and industrial transformation. This diversification becomes all the more important during periods when individual themes experience significant volatility on the stock market.

Positioning & Outlook

The past quarter has not altered our fundamental investment thesis – though it has evolved a step further. Over the past two years, the key insight has been: AI needs electricity. In our view, the next phase is this: AI does not need just any electricity – but electricity that is readily available, in the right place and at the right time.

And this is precisely where physical infrastructure begins to play a decisive role. Data centres can be planned and built quickly. However, new transmission lines, transformers, power station capacity and grid connections often take considerably longer to come on stream. The more rapidly the expansion of data centres progresses, the more apparent this discrepancy becomes. We see the current moratoriums as a clear sign that the existing infrastructure is failing to keep pace with the speed of demand.

Following the US mid-term elections, we expect the discussion to shift more strongly away from blanket construction freezes towards the question of under what conditions new projects may be built. In this context, the principle that large consumers must finance a larger proportion of their additional infrastructure themselves is likely to remain. For companies in the sectors of power generation, grids, storage, transformers, cables and energy efficiency, this would, in principle, be a constructive environment.

At the same time, we take the market correction seriously. After some dramatic share price increases in some cases, strong growth alone is no longer sufficient. In the next phase, the decisive factors will be valuation, actual orders, available production capacity, balance sheet quality and the ability to translate growth into rising profits and cash flows. The market is beginning to distinguish more clearly between ‘stories’ and actual winners. We regard this as healthy in the long term and are convinced that we are well positioned in this regard.

In the ERSTE GREEN INVEST fund, we currently hold the largest weight in the energy sector (63.6%), ahead of transformation (16.7%), followed by water (9.8%), recycling (7.5%) and adaptation (2.4%). 

In the ERSTE WWF STOCK ENVIRONMENT fund, the largest weighting is in the renewable energy sector (32.7%), ahead of energy efficiency (28.6%), followed by water (10.9%), recycling (9.7%), mobility (7.6%) and energy storage (4%).

Note: The portfolio allocations shown reflect market conditions as of October 16, 2026. These allocations are subject to change as part of active management and in response to market movements.