Back
Aegon Asset Management’s Marwick: The sustainable sectors poised for a bounce back

The problems that have caused sustainable sectors like solar and biotech to underperform are set to subside and will offer investors attractive buying opportunities once again, according to Claire Marwick, co-manager of the Aegon Global Sustainable Equity Fund.

Marwick says higher interest rates and inventory issues are among the headwinds that have triggered earnings issues across some sustainable sectors in the past two years, causing disappointing share price performance across parts of the asset class. However, she says these issues are largely temporary, with the medium and long term opportunity remaining very much in place.

 

“Solar is one sector that has a difficult time of it for a number of reasons,” she says. “Firstly, in residential solar, some large subsidies changed or came to an end. The most impactful one was in California, which is an outsized portion of the whole US residential solar market (40%). The subsidy was reduced in April 2023 – and that led to a rush of orders to beat the deadline and then nothing after that.

 

“Then power prices fell in 2023 after the Russian invasion of Ukraine had caused them to spike up the year before. That was a positive development generally, but it did reduce the incentive to install residential solar. And then finally we had a huge build-up of inventory in Europe as Chinese companies flooded the market with solar panels.”

 

While these factors combined hit the earnings of a range of solar stocks, Marwick says they are short-lived and do nothing to reduce the overarching investment case.

 

“Solar power generation today is the cheapest form of energy generation available to us – even excluding subsidies,” she says. “So, if one’s motives are purely financial, solar is the way to go.

 

“The IEA forecasts solar capacity to triple from 2022 levels to 2027 and grow from there. Solar is expected to contribute 22% of our power needs by 2027, from just 3% 10 years ago. This adds up to a very positive demand backdrop for solar companies and that is why we are now looking for opportunities as these headwinds pass.”

 

Marwick says another example of a sustainable sector poised to bounce back is life sciences, particularly the companies’ providing equipment for drug development and testing to the pharmaceutical sector.

 

“There are some very good quality companies in this space, and the industry tends to grow stably alongside drug development,” she says. “But earnings have been falling for a few reasons in recent years. A big one was Covid, which meant that there were bumper sales of equipment and consumables at the start, to meet copious testing and drug development needs, but a lull afterwards, as healthcare companies had no need to replenish stocks.”

 

A further problem was that fact that the customer base, partly comprised of early-stage biotech companies, found funding harder to access when interest rates rose, hitting demand.

 

“What’s happening now is that funding to biotechs is growing again and customer inventories are being worked through,” says Marwick. “This is a classic case of great companies experiencing a tough time that won’t last forever. Danaher, held in the Aegon Global Sustainable Equity Fund, for instance, told us at Q1 results that orders are starting to grow, and the stocks are starting to pick up.

 

“The point is that there have been some prominent parts of the sustainable universe that have had earnings problems and that made life difficult for investors. But these are temporary issues and we think the medium and longer case for investment is as strong as it ever was.”

 

From 30 May 2024 the Aegon Global Sustainable Equity Fund has been reclassified as an Article 9 fund under SFDR to reflect that it has sustainable investment as its objective.

 

The Fund's sustainable investment objective is to invest in the equities of companies whose products, services and activities are making a positive contribution to social and environmental outcomes aligned with the Fund’s six sustainability ‘pillars’ or themes.  

 

There are three environmental themes (Climate Change, Eco Solutions and Resource Efficiency) and three social themes (Health & Wellbeing, Inclusion and Sustainable Growth). Securities that align with these themes are considered by the Investment Manager to be ‘sustainable investments’ as defined under SFDR. The Fund will invest at least 90% of its net assets in sustainable investments. 

 

-Ends-

 

Notes for the editor

 

About Aegon Asset Management

 

Aegon Asset Management is an active global investor. Our 385 investment professionals manage and advise on assets of €314 ($337/£269) billion (as of March 31, 2024) for a global client-base of pension plans, public funds, insurance companies, banks, wealth managers, family offices and foundations.

 

We organize our investment capabilities around four focused investment platforms where we have extensive asset-class expertise: Fixed Income, Real Assets, Equities and Multi-Asset & Solutions. Each platform has dedicated teams, organized globally and committed to maximizing their specialist areas. These platforms and the Fiduciary business are supported by a team dedicated to responsible investing. 

 

By organizing our investment teams globally, we work to harness our expertise and research resources across regional boundaries. We believe this enhances our performance potential and helps provide better investment outcomes for clients.

 

Across platforms, we share a common belief in fundamental, research-driven active management, underpinned by effective risk management and a commitment to responsible investment. Our investment platforms have the flexibility to organize their resources and processes to best suit their area of focus.

 

We are a global business: Our 1,200 employees work across Europe, the Americas and Asia. We invest globally and serve clients locally.

 

For more information about Aegon Asset Management, visit www.aegonam.com

 

This document is for use by professional journalists. Its content is written for use in trade and retail publications. 

Past performance does not predict future returns. Outcomes, including the payment of income, are not guaranteed. 

 

All investments contain risk and may lose value. Responsible investing is qualitative and subjective by nature, and there is no guarantee that the criteria utilized, or judgement exercised, by any company of Aegon Asset Management will reflect the beliefs or values of any one particular investor. Responsible investing norms differ by region. There is no assurance that the responsible investing strategy and techniques employed will be successful. Investors should consult their investment professional prior to making an investment decision.

 

Opinions and/or example trades/securities represent our understanding of markets both current and historical and are used to promote Aegon Asset Management's investment management capabilities: they are not investment recommendations, research or advice. Sources used are deemed reliable by Aegon Asset Management at the time of writing. Please note that this marketing is not prepared in accordance with legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing by Aegon Asset Management or its employees ahead of its publication. 

 

All data is sourced to Aegon Asset Management unless otherwise stated. The document is accurate at the time of writing but is subject to change without notice. Data attributed to a third party (“3rd Party Data”) is proprietary to that third party and/or other suppliers (the “Data Owner”) and is used by Aegon Asset Management under licence.  3rd Party Data: (i) may not be copied or distributed; and (ii) is not warranted to be accurate, complete or timely.  None of the Data Owner, Aegon Asset Management or any other person connected to, or from whom Aegon Asset Management sources, 3rd Party Data is liable for any losses or liabilities arising from use of 3rd Party Data. 

 

This document is issued by Aegon Asset Management UK plc in the United Kingdom and is issued by Aegon Investment Management B.V. in the European Union and European Economic Area. Aegon Asset Management NL is a trading name of Aegon Investment Management B.V. 

 

Aegon Asset Management UK plc is authorised and regulated by the Financial Conduct Authority. Aegon Investment Management B.V. is authorised and regulated by the Netherlands Authority for the Financial Markets.  

 

 

Exp: 2 June 2025

AdTrax:  6656629.1. 

Author

Claire Marwick
Investment Manager

Claire Marwick, investment manager, is a member of the global equities team, with responsibility for co-managing our Global, International and US Sustainable Equity strategies.

View profile