Global Decarbonisation Monthly Report | February

17 February 2022

A brutal correction penalizing '20 & '21 top performers indistinctively

We believe climate change is the biggest problem we face, and mitigating it is the biggest investment opportunity of our lifetime. Companies providing compelling climate change solutions benefit from multiple tail winds, are part of the most powerful long term mega trend, are reporting overwhelming revenue growth rates, and profit from an ongoing expansion in the addressable markets (from EVs, plant-based burger, telepresence calls, renewable energy, clean energy storage, green hydrogen, to name a few of our solutions). Timetables tell us that 100 bps increase in risk free rate cause a ca. 9% drop in NPV of a 10-year cash flow, with 300 bps increase creating a 25% drop in NPV. Warren Buffet many times made the analogy of higher interest rates equating to gravity, bringing valuations in equity markets down. Nonetheless, the market correction we have observed since mid-November is severely penalizing green growth. CLMA is down 12.8% in January. In this 1st month of the year, S&P500 was down 5.3% and Nasdaq down 9%. In CLMA 5.6% of the companies are down more than 30% in the month, while 51.6% of the constituents are down more than 30% since their 52-week peak share price. The relevant climate change solutions we represent have already seen “the end of the beginning”. Solid revenue growth is translating into profitability. Currently 82.8% of CLMA constituents by weight represent companies with positive TTM EBITDA margins. Moreover, one of the index rules is that companies with no revenue in previous FY cannot be part of the universe (e.g., Quantum Scape and Nikola are not part of CLMA). We do not represent concepts, but proven decarbonization solutions, products and services.

Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. 


Is green growth now for sale?

We will argue here that green growth i) is different from tech growth, and ii) is now severely oversold. We will also show that contrary to Armageddon causing a massive downward revision of growth prospects, we see robust evidence of the opposite: acceleration of adoption of key climate change solutions in our flagship CLMA. Tesla’s earnings reported on Jan 26th being a recent example. Lastly, we make the point that “fossinflation”, as we call the energy driven persistent part of the US CPI increase, is going to further accelerate adoption of climate change solutions and paradoxically benefit CLMA (even if inflation is prompting interest rate increases which hurts NPV of growth and if “green inflation” is present, mostly in the form of higher commodity prices of certain key energy transition minerals). Below we focus on key numbers for three of CLMA’s biggest solutions and trends. We compare the reaction of the markets with the tail winds and also the revenue and margins reported by the companies in our universe.


EV adoption already at material levels both in Europe and in China

Evidence of acceleration of adoption and change in consumer sentiment. As reported by Ark Invest, in 2021 global sales of Battery Electric Vehicles (BEV) went up by 112% (from ca. 2.3 million to ca. 4.8 million units), while in the same period sales of Internal Combustion Engine (ICE) were up 1.7%. [1] In Europe the EU proposes a ban on new ICEs sales by 2035, but adoption is already ongoing and car sales of pure BEVs overtook sales of diesel cars for the first time in December 2021 (BEV at 20% market share and diesel now at 19%; car sales of BEVs + plug in hybrid + hybrids overtook that of diesel cars in Europe back in September 2020). [2] In China, sales of BEVs + PHEVs reached 21% of total new car sales last December (pure BEVs represented 17% of the month total units registered). [3] In this leading Asian market, total sales of plug-in electric car registrations in 2021 increased by ca 153% Y-o-Y, from 1.27 million in 2020 to 3.2 million (BEVs having a 12% share). In the USA, ca. 1.5 million electrified vehicles (BEVs + hybrids + plug-in hybrids) were sold last year, representing 9.7% of all sales in 2021. Noticeably, among EVs sales Tesla continues to dominate, [4] with 72% share of the EV market. [5]

Forecasts are being updated indicating BEV to represent most of units sold sooner. Ark’s research forecasts global BEV sales will grow at 53% p.a. during the next five years, from 4.8 million in 2021 to roughly 40 million in 2026. [6] In Europe, a recent report by Element Energy forecasts BEV sales in the continent will surpass 50% by 2025. [7] The strong sales of used cars in the US last year, a record 40.9 million units (10% Y-o-Y growth growth), is being explained by most analysts as a substitution effect due to supply issues in semiconductors upsetting new car sales. [8] The average US car price in the US at year end was $27.5k, while the average price of a new car crossed the $46k level for the first time. [9] The increase in used car sales could be signalling a shift in consumer sentiment and indicate new buyers are purchasing their last ICEs at lower price point as a used car.

Tesla reported solid 2021 earnings, as well as the Chinese EV names, but shares recoiled. TSLA (down 22.24% in Jan, down 31.9% from peak last Nov 4th) Automotive revenues reached $47.2 billion in the year, 73% growth over 2020 sales. [10] Deliveries in the year reached 936,222 units (97.3% of that being Model 3 &Y) and 87% growth Y-o-Y. On the energy side, 345 MW of solar were deployed (a 68% increase over 2020), and 3,992 MWh of stationary energy storage. EBITDA margin for 2021 was at the highest point at 21.6%, GAAP net income of $5.5 billion and a year-end cash position of $17.6 billion. Capex for the year reached ca. $6.5 billion. Elon Musk affirmed in the earnings call the guidance of at least 50% growth in sale of EV units in 2022 and that Full Self Driving (FSD) could be ready by year end. [11] Yet, shares tanked and are trading at a forward P/S of 13.4 (at 50% 2022 revenue growth), while Microsoft trades at 12.1 TTM P/S and is down 8.3% YTD. Chinese EV names well represented in CLMA all reported stellar growth in sales. Xpeng (XPEV, down 36.12% this month), sold almost 100 thousand units in 2021 (precisely 98,155 units), up 263% Y-o-Y. [12] In December alone 16,000 units of their current three models were delivered, showcasing further acceleration, but the shares now trade at 16.4 TTM P/S. BYD (BYDDY, down 16.67%) sold 593,745 units in 2021, up 232% Y-o-Y, and now BEV sales represent 54% of all units as PHEVs (sold almost entirely in China) now represent ca. 46% of all units. [13] Lastly, NIO (NIO, down 34.03%) known for its BaaS unique model, sold 91,429 units in 2021, a 109% Y-o-Y growth. Their three models sold predominantly in China, but with model ES8 now also selling in Norway. Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. 


Wind energy accelerating globally, offshore in particular & Germany making bold commitments

Offshore projects had a record year. More than 18.5 GW offshore projects commenced operations in 2021 across 84 new offshore wind parks. [14] The new additions take the offshore installed capacity to 50.5 GW, remarkably 16 GW of all new offshore turbines were added in China. Last year China overtook the UK as the largest offshore wind capacity, while Europe added just 1.8 GW of new offshore wind (but has 17 GW under development). The emerging US offshore market saw its first utility scale offshore wind (the 806 MW Vineyard Wind Project) reach financial closure. Biden has a goal of 30 GW of offshore wind in the US by 2030. In Germany, the new Economy & Climate Action Minister has said this year that he wants measures in place to drive renewables to 80% of the energy mix by 2030 and make the country climate neutral by 2045. [15] The new plan would add up to 10 GW of onshore wind every year until the end of the decade, achieved by streamlining permitting processes and making 2% of land available to wind. [16] The new target for offshore wind in Germany is also 30 GW by 2030. All new buildings in Germany also need to have solar energy fitted in. The IEA in a revised forecast states that renewable power will reach more than 4,800 GW by 2026, accounting for 95% of the increase in worldwide power capacity in this period. [17] Annual addition of offshore wind is to be ca. 21 GW while onshore annual wind additions to be ca. 75 GW.

Despite the tail winds from global investment and therefore demand, the two largest players in CLMA, notably Vestas (, down 14.08%in January and down 39.9% from 52week peak), and Siemens Gamesa (, down 11.82% YTD) are experiencing head winds coming from supply chain disruptions and cost pressure. Denmark’s Vestas announced preliminary 2021 figures, including a record high 16.6 GW of deliveries, but an EBIT margin of 3% (lower than 4% margin guidance), with further warning of an EBIT margin for 2022 reaching zero. [18] The reasons for margin deterioration are related to higher transportation & logistics costs, higher energy prices and overall costs. The highest costs in a wind turbine are steel, concrete, aluminium, glass reinforced plastic, copper and magnetic materials. [19] Siemens Gamesa reiterated long term EBIT margin guidance at 8% to 10%, confirming expectations for the offshore segment given their 15 MW, 236-meter diameter enhanced solution. [20] While “green inflation” (as in increased costs of the commodities needed for the energy transition) is a concern for 2022 the deflationary trend in renewables is due to economies of scale, which revenue growth will continue to fuel. 

Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.    


Solar in 2022 will be half of all new capacity in the USA

Bloomberg NEF sees 2022 as the year when, for the first time ever, over 200 GW of new solar will be added to systems globally. The same study suggests that global cell production capacity is at 400 GW annually. The US EIA expects solar to account for almost half of all the new generating capacity of ca. 46 GW that is to be added to the grid in America in 2022. From the 21.5 GW of utility scale solar to start operation in 2022, most will be in Texas (28% of the national total). Natural gas fired power plants will represent the second largest source of new electricity with 9.6 GW being added to the system, followed by wind at 7.6 GW. The year should also see 5.1 GW of in front of the meter clean energy storage added to the grid in the US alone.

Enphase (ENPH, down 24.98%) and Meyer Burger (MBTN.SW, down 22.13% YTD) are great examples of companies very well positioned to gain from the acceleration of solar capacity. Enphase is the world’s leading supplier of microinverter based solar & battery systems. Enphase will report 2021 annual figures on February 8th, but 3Q21 numbers already indicate a solid year, as $351.5 million in revenue in the quarter were up ca. 97% over 3Q20, gross margin at 40% translating into net income margin above 6%. [21] We believe ENPH is very well positioned to capture the 10x solar US growth potential and 100x clean energy storage, which is also motivating Meyer Burger, a Swiss based company with high end solar rooftop solutions. Planning to get to 5 GW of capacity, [22] the company gives guidance of €500 million in sales in 2023, from ca. €17 million in the first half of 2021 [23] and entered the US market with a new facility in Arizona that start operations producing 400 MW of solar modules. [24] ENPH closed the month at ca. 52% below its 52-week peak price, while MBTN is down 39.8% from its 52-week peak.

The direction of travel is extremely clear and CLMA is in line with the biggest value creation of our lifetime. Increased funding from GFANZ ($130 trillion) and China ($75 trillion) will flow to scale up these solutions. China accelerating and increasing its commitment across net Zero solutions is also not priced in. As 2021 came to a close, the Chinese Research Group of the Green Finance Committee of China Society for Finance and Banking, a consortium of government, academic and private-sector experts, released a Study forecasting that China will invest $75 trillion into carbon neutrality by 2050. [25] The 200 page report summarizes investments targeting a wide range of green technologies. [26] Green loans already represent ca. 10% of the outstanding credits of Chinese banks, and this is expected to rise to 25%, while banks will also increasingly be prompted to reduce lending to high-emissions industries and to embrace ESG in the underwriting process. [27] China brings further economies of volume to solar panels and batteries, and these are the key technologies enabling the transition. 

We believe current valuations in CLMA are not pricing in this incredible potential. These forecasts of global climate change mitigation efforts, via unprecedented investments, will translate into further revenue growth for companies that are already expanding fast.  That’s why we believe there will be a turnaround to stock performance for these companies, perhaps triggered by a clear signal like the passage of the climate portion of Biden’s Build Back Better legislation slated for later this year, before the autumn Congressional elections.   Temporary supply chain issues do not point to curtailed demand. The CLMA companies are all revenue generating, and many are already profitable, differentiating them from the speculative growth companies that particularly suffer in a high inflation environment.  As the above analysis shows, there is strong evidence of continued growth and demand for the carbon avoidance solution providers represented in the CLMA portfolio, with their alternatives to traditional higher emission products and services that will suffer in the coming years. As voiced by Larry Fink, the head of BlackRock, in his annual letter this year “This is just the beginning.”   



Climate Change ETF Performance (As of 31.01.22)








CLMA iClima Global Decarbonisation Enablers UCITS ETF (Acc)







CLMA iClima Global Decarbonisation Enablers Index







Performance before inception is based on back tested data. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg / HANetf. Data as of 31/01/22. Please note that all performance figures are showing net data.

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