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World-Beating ESG Fund Buys Into Nasdaq Rout Ahead of U.S. Vote

World-Beating ESG Fund Buys Into Nasdaq Rout Ahead of U.S. Vote

A top-performing fund that backs decarbonization technology has added to its positions during this month’s tech rout, betting on further gains especially in the event of a Biden victory in U.S. elections.

The Nasdaq 100 Index’s 11% drop within three trading sessions earlier in September was a “blessing in disguise” as growth trades reversed and the “air came out” of some Biden-induced environmental bets, according to Ulrik Fugmann, co-manager of the BNP Paribas Energy Transition fund, which beat 99% of its global peers this year in the environmental, social and governance category. The fund focuses on climate technology, renewable-energy firms and infrastructure.

Its $600 million portfolio, which has returned 67% this year, swooped up shares across sectors such as solar-energy technology and electric vehicles, Fugmann said in an interview. The London-based manager believes a Biden victory will bode well for the sectors that the fund invests in, and while there could be a short-lived selloff if Trump wins, the environmental push in the U.S. will continue at the state level, he added.

Joe Biden has unveiled plans to spend $2 trillion creating a clean energy economy, which targets carbon-free power sector nationwide by 2035. “Biden has put his weight behind electrification of transportation,” Fugmann said, adding that a “broad range” of renewable technology-related firms should also do well if he wins.

Climate change has grabbed global attention in recent years with nations around the world setting goals to limit temperature increases and establishing ways to measure and verify emissions. Many money managers have taken up decarbonization as part of their investment mandate as more than 2,000 ESG funds have mushroomed over recent years, according to Bloomberg-compiled data.

The BNP fund’s top ten holdings included electric-vehicle maker Workhorse Group Inc. and hydrogen producer Plug Power Inc. as of end-August. Their shares have surged by more than 800% and 300%, respectively, this year. Holdings such as solar-parts maker Enphase Energy Inc. and Sunnova Energy International Inc. have more than doubled in value.

At over 40%, the U.S. is the fund’s largest country exposure, followed by the U.K. and China.

©2020 Bloomberg L.P.