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  Business Times 4 Jul 07
Schroders launches Singapore's first climate change theme fund
Holdings to range from power generation, energy efficiency to agro-business, water resources
By Genevieve Cua

SCHRODERS yesterday launched Singapore's first retail fund with global climate change as its theme.

The fund, which was introduced in Hong Kong last month, is being rolled out in Asia first before it is made available in the UK and the rest of Europe later this year. Up till now, managers of unit trusts here have made allocations to the climate change and ecological themes, but they have done so as part of a global equities portfolio.

Banks catering to private clients, however, have been offering structured notes with various ecological themes.

Schroders fund manager Simon Webber says the current investible universe of eligible stocks is about 550. The firm seeks out stocks that will benefit from climate change. These are expected to range from power generation and energy efficiency to agro-business and water resources.

The fund is expected to hold 70 stocks at the outset. These may include Philips Electronics, a global leader in energy efficient lighting, and Vestas, a wind turbines manufacturer.

'I can say that over two to three years, I would be surprised if the companies in our universe did not grow to 1,000 given that every sector will be affected over time,' Mr Webber says.

'We have a process of reviewing every industry, and we will review them again. As governments introduce policies to reduce gas emissions, for example, there will be an impact on companies.'

As background, it is projected that over US$20 trillion will be spent over the next 25 years on energy infrastructure. The World Bank has set aside US$250 million to fight deforestation. The market for low carbon energy products is expected to be worth at least US$500 billion a year by 2050. And the global water market is expected to grow to US$342 billion by 2010 from the present US$190 billion.

Schroders' head of retail, Chin Szu Yi, says: 'Climate change is a phenomenon that will have a long term impact on the world, so we believe there is a strong fundamental basis for its investment case. This is not a thematic fund, but a core investment that should form an integral part of every investor's portfolio.'

She adds: 'Global warming is changing the world and in the process forcing businesses to evolve like never before. Inevitably there will be winners and non-winners.'

Mr Webber says the fund's profile is tilted towards high growth, and risk is likely to be higher as well.

'Many of the companies are seeing higher demand for their products and services from climate change. This is likely to be a portfolio of higher growth and slightly higher valuations than the world index. But we have identified companies where growth is still unappreciated.'

The fund will not impose any ethical screen on its stocks. This is a deliberate move.

The fund, says Mr Webber, should not be classified as an ethical fund. 'It's not appropriate to put an ethical screen. Many funds that call themselves ethical will not invest in nuclear energy, but that is a fundamental industry that can mitigate climate change and has a strong future.'

Nuclear energy can be a non-fossil electricity generating option, along with solar, wind and hydro power. Those sources are able to generate power without greenhouse gases.

Nuclear energy, however, is meeting stiff resistance from some environmental groups.

The fund carries a sales charge of up to 5 per cent. Its management fee is 1.5 per cent, and administration fee 0.4 per cent.
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