Holger Frey Highlights Growing Demand for Environmental Solutions Amid Global Market Challenges
Despite facing global challenges, the outlook for investments guided by environmental, social, and governance (ESG) criteria has improved over the past year, according to Holger Frey, portfolio manager at Credit Suisse’s impact fund. Frey highlighted that companies involved in electric vehicles, renewable energy, and recycling, particularly in Asian markets, are well-positioned to thrive in the near future.
Frey differentiated between ESG funds based on ratings and those that are thematically driven, emphasising that thematic ESG funds, particularly those focused on environmental solutions, are especially attractive to investors. “While market headwinds remain, the environmental impact sector is gaining strong support,” Frey shared with The Business Times. He pointed to initiatives like the European Union’s REPowerEU plan, aimed at reducing dependence on Russian fossil fuels, and the U.S.’s Inflation Reduction Act, which commits US$369 billion to climate solutions, as examples of this growing momentum.
Frey believes that now is an opportune time for investors to consider these strategies, citing attractive valuations after a market correction and an improved growth outlook compared to 12 months ago. Long-term trends, such as the rising adoption of electric vehicles, increasing demand for renewable energy in many Asian countries, and the growing need for recycling, are expected to drive growth in these sectors.
The electric vehicle market, traditionally seen as a premium segment, is beginning to expand into the mass market, with China already producing more affordable models. While established renewable energy sources like solar and wind power are well-recognised, there is still significant growth potential in complementary technologies, such as solar panels paired with battery storage solutions.
The Credit Suisse impact fund, managing around US$850 million, invests primarily in small- and mid-cap companies that focus on environmental solutions. To qualify for investment, companies must generate at least 50% of their revenue from environmental products, services, or technologies. Frey explained that the fund targets pure-play companies, believing that these will benefit from an expanding market driven by climate change and the rising demand for sustainable solutions.
In response to increasing regulatory scrutiny of ESG-labelled funds, Frey noted that the fund already uses a variety of methodologies to assess the environmental impact of the companies it invests in. This includes analysing sustainability reports, third-party ESG data, and alignment with the United Nations’ sustainable development goals. The team also monitors key performance indicators such as reductions in carbon emissions and water consumption.
Frey stressed the importance of active engagement with portfolio companies, requesting more detailed disclosures to ensure transparency. He expressed support for further regulatory measures, stating, “We’re not afraid of regulations; in fact, we welcome more detailed disclosures.”
