THIS MATERIAL IS A MARKETING COMMUNICATION.
ESG in Green Power – A Revolution is Underway
A sustainable, endless source of ecologically clean power is a top choice for ESG portfolios
As environmental, social and governance (ESG) mandates increasingly form key investment components for retail and institutional portfolios, one of the brightest spots is in the potential of alternative energy. In particular, ESG portfolios are more and more looking to solar power, and by extension, the companies that manufacture components to harness it, as crucial parts of their investment strategy.
Solar installation activity in many countries reached high single-digit growth by the end of September of last year, missing expectations set at the beginning of 2020, but posting much better numbers overall since the covid-19 pandemic began (chart 1). Looking ahead, on the demand side, China, the largest solar market in the world, is proactively taking on more responsibility in reduction of carbon emissions, though it will cancel subsidies for utility-scale solar projects later this year. The US can harness substantial solar resources and can expect to see increased demand for solar throughout the term of the Biden presidency. India, formerly the third-largest solar market, has been significantly affected by covid-19 outbreaks in 2020 and again this year. The virus also impacted other major markets to one degree or another, including Europe, the Middle East, and South America. We expect to see a moderate recovery in these regions when the public health situation improves (chart 2).
Trends in the supply side are more visible than in the demand side. The graphs below show the growth of solar demand and cell capacity along the major solar supply chains through 2021. The supply and demand balance in the polysilicon sector is likely to improve (chart 3), with the top five producers potentially holding more than two-thirds of total market share.
Consolidation in wafer use is now decelerating (chart 4), with the top five producers’ total market share expected to reach nearly 80% by the end of this year. Wafer oversupply likely will occur this year, while the realized price will depend on demand as well as how much effective capacity is put into operation each quarter. Further capacity from second-tier wafer manufacturers, module makers, and wafer equipment producers should appear by the end of 2021. These new capacities are mainly for M10 (182mm x 182mm) and M12 (210mm x 210mm) silicon wafers, although the latter will require more time to show its true efficiency gain.
A solar cell is less profitable in the solar supply chain (chart 4). Technology plays a crucial role in competitive landscape dynamics, but we see it as a stable factor in a medium-term cycle. Thus, both wafer (chart 4) and module makers (chart 6) are increasing cell production now to improve supply chain stability as well as margins. We can see in the graph below that Longi has added over 15GW of solar cell capacity in the last two years and ranked No.3 by 2021, followed by integrated solar materials makers like Jinko Solar and JA solar. TA solar cell is an intermediate part, driven by downstream demand. That is, module makers and their sales channels to some extent determine solar cell competitive advantages within the context of a technology cycle.
Consolidation on the module end is accelerating, with the top 10 makers’ total market share increasing from 57% (2020E) to 64% (2021E) as chart 6 illustrates. Most of the leading module players are adding capacities and building up sales channels for the future. This sector will significantly impact global demand for cells and even certain wafers.
There are several advantages that come to mind for investors evaluating the solar power sector, and, as noted at the beginning of this article, especially so for those with or considering ESG mandates. Solar power is increasingly seen worldwide as an essential form of energy going forward, and a far less costly one that that afforded by fossil fuels and other environmentally damaging means. The sector itself is rapidly growing and a magnet for skilled workers and innovative technologies. In addition, the sum emits no hydrocarbons or other pollutants, and is a potentially endless source of inexpensive energy.
Staying Ahead with Mirae Asset’s Latest Insights
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2021. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.