The natural resources are used and degraded today so much, that it cannot be maintained in a long-term view . People say, that the actual consumption of resources is at one and a half planets, meaning one and a half times the quantity that our planet can provide in a long-term period. The results of overuse are shortage, expensive prices and environmental concerns. Products that can alleviate those problems exist and are often lucrative investments. Some examples:

 

Fire (Energy): A big part of the energy consumption of buildings can be saved by insulations and modern air conditioning technologies.

Water (Drinking Water): In vegetable cultivation about half of the water consumption can be saved with proper water pipes and modern drip irrigation.

Earth (Agricultural Land): Approx. one third of all food and feed globally perishes. Suitable packaging can diminish these losses.

Air (Clean Air): In China 66 out of the 74 largest cities must tackle air pollution because they miss the government's minimal standard.

In the outline of the target sectors we adhere to the ancient four-elements-theory, according to which the world is composed of the four basic elements fire, water, earth and air. The element fire corresponds to the portfolio segment «energy», the element water to the subject of «drinking water» and the element earth is allocated to the subject agribusiness, food and recycling of mineral resources. Also the  fishing industry belongs to earth, because it’s about the resource “fishing grounds”. The resource «clean air» is protected by technologies that purify exhausting gases or fuels, which strain the air with less pollutants.

FIRE (ENERGY)

  • Building Technology: Insulation, Heating, Cooling, Lightning
  • Industrials: Engines, Power Electronics, Process Technology
  • Transport: Train Technology, Auto Technology

WATER

  • Drinking Water: Preparation, Desalination, Supply
  • Sewage Water: Drainage, Cleaning
  • Irrigation: Infrastructure

EARTH (GROUND)

  • Agricultural Land, Oceans: Plant Protection, Nutrients, Fishing Industry
  • Food: Feed Preservation, Packaging
  • Mineral Resources: Infrastructure

AIR (CLEAN AIR)

  • Waste Gases: Catalysts, Flue Gas Scrubbing, Filtering
  • Fuel Cells: Low-Emission Fuel

We search for companies with an attractive quality ratio and valuation. Qualitatively strong companies are established companies with a strong balance sheets, resilient cash flows and a crisis-proof profitability. A good indication of this is the return on capital employed (ROCE).

ROCE: The return on capital employed is a suitable benchmark for the attractiveness of the market and the sturdiness of the company. A high ROCE means that the fixed costs are low and the capital needed for organic growth is also very small.

EV/EBIT: The ratio of enterprise value to operating profit is a calculation ratio which considers the situation of debt and is oriented on the cash flow.

Throughout the portfolio construction process, we pay attention to a good diversification in resources, companies, geographies, company sizes and business models. In each subject area we have a ranking of attractiveness of the company by quality and valuation.

Companies with an attractive quality-/valuation-ratio are examined by a sustainability analysis from our partner Vontobel Asset Management AG (VAM). VAM investigates the chances and risks regarding to environmental impacts, social aspects and corporate governance (ESG). VAM relies on database, for example resource consumption or pollutant emissions. In addition they analyse with own specialists social or legal risks, assess management processes and evaluate the environmental impact on the entire value chain from the suppliers through the production to the use of the products.

The contribution of the sustainability examination to the investment process is on the one hand, the identification of the governance and the company culture. On the other hand it locates the sustainability analysis of specific risks, that are not or insufficiently considered by accounting. The sustainability examination is a useful framework in addition to Carnot’s work which is mostly based on financial ratios.

 

YOURSRI & MSCI

ESG Rating

Carbon Report

The Carnot Efficient Resources Fund is an Impact investment fund that invests in listed equities. The companies represented in the fund develop and produce products and technologies that reduce the consumption of natural resources and reach people around the world. In addition to the financial return, the fund investor, as co-owner of the portfolio companies, has a substantial positive effect in terms of the UN's sustainable development goals. This impact report aims to illustrate and quantify this effect. Carnot Capital's full impact investing approach also relies on engagement to map, measure and create impact. It is detailed in the research paper titled "Investing into Energy and Resource Efficiency with a Measurable Impact", which can be found here and on Carnot Capital’s website.

For Carnot, financial return is the primary goal and a measurable part of fund performance. Pure environmental or social objectives at the expense of the financial return are excluded. All of Carnot's selected investments will continue to be subjected to a fundamental value analysis using financial methods.

Carnot Impact Investing uses a Sustainable Development Goals (SDG) mapping to document the sustainability of external effects for selected portfolio investments in qualitative and quantitative reporting.

Reduction in the consumption of natural resources (= resource efficiency)

2. Zero Hunger

3. Good health and well-being

6. Clean water and sanitation

7. Affordable and clean energy

8. Decent work and economic growth

9. Industry, Innovation and Infrastructure

11. Sustainable cities and communities

12. Responsible consumption and production

13. Climate action

14. Life below water

For Carnot, financial return is the primary goal and a measurable part of fund performance. Pure environmental or social objectives at the expense of the financial return are excluded. All of Carnot's selected investments will continue to be subjected to a fundamental value analysis using financial measures.

 

 

 

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