Global Decarbonisation Monthly Report | March

March 2021 – The first rebalancing

• The first Wednesday in February was the day of our Climate change ETF's first rebalancing. Two companies were removed due to a decline in average daily volume, while ten names were added to the index. CLMA is now comprised of 158 shares. We dedicate this monthly report to introducing these new CLMA constituents.
• On February 19th, the US re-joined the Paris Agreement. At the beginning of the same week, Texas was hit by a blizzard and sub-zero temperatures stressed the state’s grid operator ERCOT and blackouts left millions without power and heat for days. While demand for electricity hit record high of over 69 GW, the cause of the failure was not excess demand but lack of supply. Many large journals[1] blamed the reduction in wind generation from the state’s 22 GW of wind capacity due to blades freezing. ERCOT data shows that the primary failure came from the state’s natural gas fleet that was not able to supply 26 GW of the 34 GW of lost capacity.[2] The incident in Texas shows the pressing need for more reliable and cleaner grids.  A full new regulatory framework is expected to be debated at US Congress in the next couple of months.

   

iClima Global Decarbonisation Enablers Index Performance

Past performance is no guarantee of future performance. Source: Bloomberg, Solactive, HANetf *TNR Index, in USD. 12 Month figures based on 31.01.20 -28.02.21.

Performance in February

The last week of February was a volatile one for our Climate change ETF. Positive news on Covid vaccination increased confidence on early economic recovery, but fuelled concerns of increasing inflation. Speaking to Congress twice in the week of February 22nd, the FED Chairman mentioned a possible normalisation of interest rates, which triggered a sell-off in US Treasuries. The 10- and 30-year Treasury yield rallied in the month, by over 32 bps each.[1] Rising yields hurt many stocks in CLMA (as well as tech stocks in general) as stocks like Tesla (down 21.8% in the month) are expected to generate most of their free cash flow in the longer term.

CLMA closed the second month of the year down 2%, YTD now up 4.2%. In February 2021, the worst performing subsectors were EV & Bikes (down 1%), Renewable Energy Assets (down 1.28%) and Alternative Fuels & Fuel Cells (down 0.82%). Source of all data: iClima/ Bloomberg

Past performance is on guarantee of future performance. Source of all data: iClima/ Bloomberg. Data as of 28.02.21

iClima Global Decarbonisation Enablers Performance Table As of 28.02.21

Introducing the New Constituents

Blink Charging Co (BLNK, down 10.5% YTD) joins CLMA’s Electric Transportation subsegment. In early 2021, Forbes named the Florida-based provider and operator of cloud-connected Electric Vehicle (EV) charging solutions on its list of America’s best small companies.[4] Blink continues to grow its charging network through strategic partnerships with cities and businesses across the USA and globally, building on a strong 2020 where highlights included a new mobile charging solution,[5] the acquisition of carsharing service BlueLA[6] and a partnership with Enersys (ENS, also in CLMA) to produce wireless and fast-charging systems with storage.[7]

Carbios SA (ALCRB, up 17.3% YTD) An edition to CLMA’s Recycling & Materials subsegment. The French company specialises in the use of enzymes for the creation of biodegradable plastics as well as the bio recycling of plastic bottles, packaging and films. They recently announced a breakthrough having produced clear PET plastic bottles from textile waste which “opens up access to a waste stream of up to 42 million tons per year, worth over $40bn”.[8] The company has a number of strong partnerships with companies including L’Oreal, Nestle Waters and PepsiCo,[9] as well a joint venture with Novozymes for scaling-up the production of PET-degrading enzymes.[10] 2021 will see the opening of an industrial demonstration facility for the enzymatic recycling of PET plastic[11] as the company seeks to ride the tailwinds of the EU tax on non-recycled plastic which came into effect on the 1st of January 2021.[12] 

Doosan Fuel Cell Co Ltd (336260, down 6.5% YTD) The first Asian company in our Climate Change ETF's Alternative Fuels & Fuel Cell subsegment. Doosan currently holds close to 80% of the domestic fuel cell market in South Korea[13], a country that is leading the way towards the global hydrogen economy with its Hydrogen Economy Roadmap 2040 outlining the country’s ambitions, including the supply of 1.5GW of fuel cells for power generation by 2022 and over 15GW by 2040.[14] In 2020 Doosan provided the fuel cells for Daesan’s 50MW Hydrogen Fuel Cell Power Plant[15] and has set sales targets of ~1.4Bn USD by 2023 and ~3.6Bn USD by 2030[16] as the company expands its business through a licensing partnership for CERES Power’s solid-oxide fuel cells as well as expansion into maritime, electrolyser and commercial vehicle applications.

Kandi Technologies (KNDI, up 2.6% YTD) An addition to the EV & Bikes subsegment. Headquartered in Jinhua China, Kandi sells EVs, battery swap systems, EV parts as well as off-road and all-terrain vehicles. 2020 saw the company launch the Maple Leaf 30x SUV in China under the Fengsheng brand, which it owns a 22% stake through a joint venture with Geely,[17] as well as expand their EV sales to the US with the launch of the K23 and K27, both compact vehicles with an emphasis on affordability, with the K27 coming in at as low as $9,999 after federal tax credit. The company also announced a partnership with Ruibo and Jinpeng, establishing a rideshare platform in 3rd and 4th tier Chinese cities for which it will provide its K23 vehicles as well as battery swap systems.[18]

Li Auto Inc (LI, down 12% YTD) A second addition to the EV& Bikes subsegment. The Chinese automaker which went public in July 2020 currently manufactures one vehicle, the Li One SUV, a smart, luxury, plug-in hybrid vehicle which may appeal to those with concerns over a lack of EV charging infrastructure with its 800km NEDC range. By December 2020 the company had sold more than 30,000 vehicles since the launch in November 2019.[19] The company also plans to launch a premium smart SUV in 2022 which will have autonomous driving capabilities provided through its partnership with NVIDIA and Desay NV and may launch an all-electric vehicle in the future, although on Q3 2020 earnings call CEO Li Xiang said that the company won’t do so until fast-charging technology has matured.[20]

McPhy Energy SA (MCPHY, down 19.1% YTD) A second addition to the Alternative Fuels & Fuel Cell subsegment. 2020 saw the French firm’s orders up 75% and revenues up 20% with supply of alkaline electrolysers and hydrogen stations representing 60% and 40% of sales respectively.[21] Key projects included: Djewels, the largest -zero-carbon hydrogen production unit in Europe for which they will supply a 20MW electrolysis platform to convert renewable energy into hydrogen, Zero-Emission Valley which plans to deploy 1,200 fuel cell vehicles, 20 hydrogen stations by the end of 2023 in the Auvergne-Rhone-Alpes region, for which McPhy will equip the hydrogen stations and electrolyser technology. The company will also supply the hydrogen infrastructure for the metropolis of Dijon where energy from household waste incineration and local renewable sources will power a McPhy electrolyser and hydrogen filling station which is expected to supply hydrogen fuel for 27 buses, 9 garbage trucks and around 15 light vehicles initially with numbers increasing to 200 buses, 50 garbage trucks and 250 light vehicles by 2030.[22]

Siemens AG (SIE, up 8.9% YTD) Added to the Electric Systems subsegment. After the spin-off of Siemens Energy in late 2020, Siemens AG has seen a 25% rise in share price as the company turns its focus to its Smart Infrastructure, Digital Industries and Mobility segments as well as its Siemens Healthineers subsidiary, of which it owns a 79% stake.[23] The company recently reported results for Q1 2021 that were significantly above market expectations, seeing significant growth in China, with their Digital Industries and Smart Infrastructure segments seeing 5% and 7% YOY growth respectively.[24] 2021 has also seen the Mobility segment sign a MoU with an order value of ~$3bn to install and service Egypt’s first ever high-speed rail system.[25]

Tattooed Chef Inc (TTCF, down 12.9%)  Joining the Food Solutions subsegment. This US planted-based food company completed a SPAC merger in October 2020 and their December Analyst Report showed that the company’s product range had grown to 38 branded products with a 5-year CAGR in sales of 63%.[26] It also revealed that 2021 will see Tattooed Chef launch its first marketing and advertising campaigns, double manufacturing capacity and continue the roll out of its e-commerce platform as well as continuing to expand its US retail distribution, which already includes the likes of Walmart, Costco and Target. 2020 revenues came in at $108.9 million with the company giving guidance of $222 million for 2021 and $1 billion in 2026 with a view that gross margins will increase from 15.4% to +35% over that period.[27] 

Tomra Systems ASA (TOM, down 12.3% YTD) A second addition to the Recycling & Materials subsegment. The Norwegian company which specialises in sorting systems for food, waste and mining is most famous for its reverse vending machines (RVMs) where consumers can recycle their plastic bottles and reclaim a small levy that is placed on them. As the market leader for RVMs (which represented 39% of 2019 revenues) Tomra may stand to benefit as governments and large corporations move to align with the EU single-use plastics directive which targets a 90% recycling rate for plastic bottles by 2029 (with an interim target of 77% by 2025).[28] The company has seen a CAGR in revenue of 28% from 2004-2019 and expects growth to continue at an average above 10% to 2023 while paying a dividend of 40-60% of EPS.[29]

Xpeng Inc – ADR (XPEV, down 20.4% YTD) The third addition to EV& Bikes subsegment. Another 2020 IPO saw Xpeng raise $1.5billion as it listed on the New York Stock Exchange. The tech-focused company boasts that 40% of employee’s are focused on R&D[30] and recently launched a large over-the-air update to its vehicles which included safety and  autonomous driving features that may appeal to its target market in mid-to high-end automotive segment.[31] The company sells 2 smart EVs, its SUV the G3 and its sedan the P7 which are capable of up to 520 and 706km NEDC driving ranges respectively with Chinese customers also getting access to their super charging network which is available across the country. Xpeng’s annual deliveries reached 27,042 vehicles in 2020 a 112% YoY increase[32] although still behind NIO (43,728) and Li Auto (32,624) as the company scales up capacity and looks to bring its cars to the Europe after initial sales in Norway.

Past performance is no guarantee of future performance. Source of all data: Bloomberg. Data as of 28.02.21