LI, Tao @ Hong Kong

China, one of the key parties in the Copenhagen Accord, is moving fast to work on the climate problem and has outperformed competitors in the wind and solar power market, according to asset management company Schroders.

The firm also believes the effects of climate change will provide attractive investment opportunities for investors.

During a media briefing introducing the group’s new fund, Simon Webber, fund manager of the Schroder ISF, advised investors to focus on companies benefiting or likely to benefit from efforts to mitigate or adapt to climate change.

He said as low carbon economic transition plans develop, policy intensity and complexity, energy prices and capital intensity are all likely to increase, which will lead to intense competition among investors to develop leadership in low carbon industries.

The economics of climate change will also alter the companies’ behavior. Expenditures on mitigation and adaptation will rise, and financial implications will only increase, leading to greater dispersion of valuation.

“Clean energy, low-carbon fossil fuels, energy efficiency, environmental resources and sustainable transport – the 5 key themes are within a ‘predictable revolution’,” said Webber.

Webber said video-conferencing is a hugely compelling investment, as it reduce costs and emissions, which, in turn, can provide new business opportunities.

Moreover, he said climate change will increase disruption of food production, countering which will require significant improvement in agricultural productivity. Several countries in the world, including China, have carried out subsidy schemes for electrified vehicles. The challenges in the development of rechargeable batteries also underscores great potential in technology.

On the other hand, the renewable energy sector, Webber said, has been left reeling of late. “It is striking to look back over the last three years and see how things have changed for the flagship renewable stocks. Despite significant volume growth in industries such as wind and solar energy, pricing has come under significant pressure from new low-cost entrants in Asia.”

“Chinese companies are doing a good job in both innovation and lowering costs in the wind and solar power technology. If their competitors cannot reform themselves fast enough, they will be left farther behind,” said Webber.

“I am turning more positive on the renewable energy sector now, as more government climate policy targets will drive the growth of renewable energy, and with the improvement of financing conditions slowly improving, valuations of their funds will become attractive again,” Webber added.

(HK Edition 03/27/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-03/27/content_9650953.htm