Climate change funds tick all the boxes

Dow Jones' decision to remove AGL from its Sustainability World Index (DJSWI) illustrates the overlap that now exists between infrastructure investments, traditional and alternative energy and sustainable investments.

AGL was recently removed from the index following its latest review, but has vowed to work hard to be re-included, according to Ethical Investor magazine.

The DJSWI comprises is a "best of sector" index comprising 320 companies that amount to $6 billion in market capitalisation. The latest review saw 33 new companies added and 25 omitted, including two deleted from Australia and one added.

The investment sector cross-over is because sustainably oriented investments that target sectors such as water resources infrastructure can fit into several possible classifications and cross several investment styles, said Jens Peers, head of eco funds at KBC-Liontamer.

"Water for us is both growth and defensive, it makes it an all-season fund. Water infrastructure for us includes pipes, waste and treatment management, and utilities," he said.

Understanding the alternative energy value chain also allows managers to find investment opportunities in wind energy production as well, said Peers.

"In the wind value chain there is only about two or three companies that make all the gear boxes for the wind turbines and this creates supply bottlenecks. We expect price growth of up to 20 per cent per annum because of this."

Peers said climate change funds that combine water funds for beta and alternative energy funds for alpha can substitute for traditional investments already in a portfolio as they are really a mix of infrastructure, income producing, and capital growth assets investors are already familiar with.

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