Publication details

CI Global Asset Management

October 25, 2021

Climate Change - Clean Energy and a Circular Economy


Munro Partners

Fighting climate change is about more than electric vehicles and efficient light switches. There are entire industries that are set to benefit from the investment in technologies and processes that will help reduce carbon emissions across our planet. Two main categories that we expect will emerge as climate success stories are clean energy and the circular economy. But what are they exactly and how can you access their growth potential? Let’s find out!

Clean energy solutions

Clean energy encompasses companies at the forefront of renewable energy generation covering wind, solar and renewable diesel.

For example, wind generation, both onshore and offshore, is expected to be a new leading source of power and energy. To illustrate, as much global offshore wind capacity was being auctioned in 2020 as what has been built in the entire timeframe of offshore wind energy. The chart below shows what capacity onshore and offshore wind power must reach for the world to get to zero carbon by 2050.

To give you a better idea of how a clean energy company can expect to grow in the push for fuel alternatives, let’s look at a leader in this space.

Clean energy leader: Ørsted

Listed in Denmark, Ørsted is the world’s largest offshore wind developer and one of our largest climate holdings—its market capitalization is already over US$100 billion.

While onshore wind energy has been around for a while, offshore wind is at an earlier stage of development. It’s also one of the fastest growing segments of the renewables industry as it’s coming from a lower market share base than onshore wind and solar. Offshore wind only really exists in Europe today, with opportunities in the U.S. and Asia starting to open up. Analysis of net zero targets around the world suggest that offshore capacity can grow from approximately 40GW today to around 200GW in 2030, and then substantially again beyond 2050.

Although not without competitors, Ørsted’s experience and strong lead in offshore wind makes them the global developer of choice. It’s even helping Taiwan Semiconductor Manufacturing Company Ltd. develop the largest offshore wind farm in Taiwan. While it will lose some share as the industry matures and oil companies enter, we see decades of growth ahead for Ørsted. Given the increasing complexity of projects and its considerable head start, we believe the company will maintain a strong industry position and be one of the ‘offshore majors.’

Circular economy solutions

The circular economy looks at companies most likely to benefit from efforts to improve recycling, alternative packaging materials and wastewater management.

Currently, only 14% of plastic is recycled around the world, relative to 60% of paper and up to 90% of steel. We expect a significant lift in the percentage of plastic and paper that gets recycled as governments, corporations and investors place a higher value on the true cost of these materials to the planet.

With today’s low oil and gas prices, the cost of producing plastic is cheap. However, in the longer term, we expect costs to rise as the impact on society becomes more readily apparent (e.g., via global plastics taxes and consumer awareness). We’ll likely see similar pushes to improve paper recycling due to concerns around deforestation, as well as steel to combat the significant amounts of CO2 released in production.

The idea of seeing competitive growth from reusing or recycling materials, rather than creating a new, may sound a little counterintuitive. So, let’s dive into one of our top circular economy leaders—TOMRA.

Circular economy leader: TOMRA

Decarbonization is at the core of Norwegian-based and listed company, TOMRA, as their closed-loop recycling system aims to address the exponential increases in global landfills.

Using state-of-the-art technology solutions, they have developed a world-leading deposit refund scheme (DRS) that aims to capitalize on this megatrend. These automated DRS systems process refillable and non-refillable containers while also addressing global concerns around food safety and quality standards.

As governments across the European Union and U.S. begin to adopt this technology, TOMRA stands to benefit from an under-penetrated addressable opportunity, which they estimate to be between US$50 billion and US$80 billion.

Ways to incorporate clean energy and the circular economy in your portfolio

Fortunately, there are a growing number of ways to ensure your investments either take sustainable practices into consideration or invest directly in the companies and industries that are enabling the decarbonization of our planet. With CI Global Climate Leaders Fund, our goal is to create a portfolio of climate winners—companies that are best positioned to win from the growing investments and structural changes that come with fighting climate change.

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