Pictet – Clean Energy – PICTET ASSET MANAGEMENT

CLIMATE CHANGE AWARENESS AND ACTION ON THE RISE

Concern about climate change is growing, with youth
and broader protest movement only the tip of the
iceberg.
› Greater awareness is starting to having political
implications (e.g. EU) and, as a result, policy makers
are strengthening environmental standards.
› Companies are stepping up their commitments to
clean energy as illustrated by the Renewable Energy
100 (RE100) coalition.
› Many large cities around the globe plan to ban diesel /
gasoline cars by 2030

Survey: “The world is facing a climate emergency and unless greenhouse gas
emissions fall dramatically in the next few years global warming will become
extremely dangerous”

GROWING HEALTH CONCERNS

› Air pollution emerging as deadliest form of pollution and
fourth leading risk factor for premature deaths worldwide
› 7 million premature deaths worldwide attributable to air
pollution – more than tobacco – representing about 13% of
every total deaths.
› Today >90% of world population live in areas where fine
particle levels exceed WHO’s global air quality guidelines
› 90% of world’s children are breathing toxic air, WHO study
finds
› Health consideration play an increasing role in shaping
government regulation in energy and transportation industries
4
Sources of air pollution

EVEN MODEST CLIMATE GOALS REQUIRE MORE AGGRESSIVE POLICIES

NET ZERO EMISSIONS EVEN MORE CHALLENGING AS GLOBAL ENERGY DEMAND CONTINUES TO RISE

› Net zero CO2 emissions by 2050 even
more challenging given growth in energy
demand
› Global energy demand forecasted to
increase by +46% by 2050
› Mostly driven by China, India and other
emerging markets
Primary energy consumption (in Bn ton of oil equivalent)
› Share of electricity in final energy
consumption – at close to 20% today –
will continue to rise in the future
› Global electricity demand
forecasted to increase by +74%
by 2050

NET ZERO CO2 EMISSIONS BY 2050: WHAT WOULD NEED TO HAPPEN?

ELECTRIFICATION OF ENERGY USE

Electricity gradually replaces fossil
fuels
➢ 80% of today’s transport, heat and
industrial energy converted to
electricity

CLEANER ELECTRICITY GENERATION

Electricity is produced from renewables
➢ Renewables grow in the generation mix
from 20% today to 85% in 2050
➢ Wind & solar alone grow from 10% today
to 70% in 2050

INCREASED ENERGY EFFICIENCY

Technology innovation & legislation
drive more efficient use of energy
➢ Growth in energy consumption slows
down from +2.5% p.a. (1965-2018)
to +1.2% p.a. (2018-2050)
➢ Deployment of energy efficiency
technologies as key driver

TECHNOLOGY INNOVATION ENABLES PROFOUND CHANGES

MULTIPLE INFLECTION POINTS

Investment Universe

INVESTING IN THE ENERGY TRANSITION

NO MORE NATURAL GAS IN THE PORTFOLIO

STRONG REGULATORY TAILWINDS

ENERGY SAVINGS THROUGH EFFICIENT MANUFACTURING

ANSYS

ENERGY SAVINGS THROUGH GREEN BUILDINGS

› Buildings account for 29%* of
global energy consumption by enduse.
They represent a significant
potential for energy savings.
› The real estate sector’s focus on
energy efficiency and green
building has accelerated in recent
years, a trend that is expected to
continue.
› Greater energy efficiency can be
achieved through technological
improvements in multiple areas:

KINGSPAN

ENERGY SAVINGS THROUGH SMART-MOBILITY

› Past legislation pushed car producers to
invest in more fuel-efficient technologies,
reducing pollution out of ICE (Internal
Combustion Engines)
› New legislation (2020-2030) leaves car
producers no other choice but to go massively
towards electrification
› Technology innovation + evolving legislation
drives two transformations at the same time in
the transportation industry: EV & ADAS
› EV (Electric Vehicles) : Continuing
reductions in battery prices and progress with
power electronics & semiconductors will bring
the purchase price of EVs on par with that for
conventional-fuel vehicles by 2025, but total
cost of ownership by 2020 already.
› ADAS (Autonomous Driving): artificial
intelligence and huge progress in computing
power and semiconductor technologies enable
gradual adoption of ADAS, which results in
fewer accidents and less energy consumption.

APTIV

ENABLING TECHNOLOGIES : SEMICONDUCTORS

Semiconductors

› Semiconductors are present everywhere and are
key enablers of change in many industries :
– Computing power, Artificial Intelligence
– Automotive (e-Mobility, ADAS)
– Industrial software, advanced simulation
– Energy efficient appliances (LED, HVAC, Heat
Pumps)
– Powerful & efficient data centers
– High-speed connectivity, 5G
› Semiconductor solutions are becoming ever smaller,
powerful and more power efficient
› Rapid progress in artificial intelligence and
computing power is leading to significant power
consumption; advanced semiconductor solutions are
paramount to minimize energy use.
› New applications such as E-Mobility require new
semiconductor materials to be used in order to
accommodate high power charge / discharge

NXP SEMICONDUCTORS

ENABLING TECHNOLOGIES : ENERGY STORAGE

Energy storage

› Lithium-ion battery prices have already
declined by 90% over past 10 years
› Another 47% decline is expected by
2024, accelerating even more
electrification of transportation as well
as renewable penetration
› Current storage industry dominated by
pumped hydro for long-term energy
storage, but lithium-ion is best-suited
for short-term usage and scalability

SPECIAL FOCUS ON E-MOBILITY

› After a century of slow evolution, the
automotive industry is now going electric,
opening significant investment
opportunities
› BNEF expects 57% of all passenger
vehicle sales to be electric by 2040,
compared to only 3% in 2019.
› Annual sales of electric cars should
surpass ICE sales around 2037 globally,
but should reach this milestone in
Europe and China by 2030 already.

WHY IS E-MOBILITY HAPPENING ?

Economic sense

› Continuing reductions in battery prices and progress with power electronics &
semiconductors will bring the purchase price of EVs on par with that for conventionalfuel
vehicles by 2025, but TCOs (Total Cost of Ownership) have already crossed.
Economic sense
› Electric motors are 95% efficient
› Combustion engines are only 40% efficient as the thermal transformation process
results in high energy waste
Electric motors far superior in efficiency
› Policy makers continue to push towards lower carbon transport, driven by
considerations such as health, climate change, energy independence (imported oil
for ICE vs domestic renewables for EV)
Government support
› An increasing number of large cities around the world announce ban of
diesel & gasoline vehicles in an effort to improve air quality
Smart cities
› VW to spend 33bn euros in next 5 years on electrification
› Plans 40% of annual sales to be full-electric by 2030, 22 millions electric vehicles sold in next 10y
Increased commitments from car producers
Source: International Council on Clean Transportation, 2019,
BNEF Electric Vehicle Outlook, 2019

E-MOBILITY INVESTMENT OPPORTUNITIES

RENEWABLE ENERGY TURNING COMPETITIVE

› Technology & economies of
scale decreased solar
energy costs by 80% over
the past 8 years and wind
onshore by 45%
› Wind & Solar cheapest ways
of producing electricity in
many countries in the
2020s and globally in the
2030s
› Gas and coal related costs
expected to continue to rise
over the coming decades

RENEWABLES : THE INFLECTION POINT (USA EXAMPLE)

› Wind and solar cheapest sources of h after US renewable subsidy removal (2023)
electricity generation, even with no
subsidy
› New wind and solar even cheaper
than running existing coal / nuclear
plants !
› Utilities now invest in new
renewable capacity based on pure
economics
› Wind & Solar expected to reach
39% of US electricity production
by 2030 (+31pts vs 2018)
› Natural gas expected to decline to
31% (-4pts vs 2018)
› Coal & Nuclear expected to decline
to 20% (-27pts vs 2018)
› Going forward, wind and solar are
the only winners

ORSTED

Portfolio Characteristics

TOP 10 HOLDINGS

OUTLOOK BY SECTOR

MULTIPLE INFLECTION POINTS