Essex GEOS Update September 2021
August brought a very alarming sneak preview at the Intergovernmental Panel on Climate Change (IPCC) release from its first working group Sixth Assessment, to be released next year. For the first time, the IPCC referred to climate “tipping points”, where in a two degrees Celsius world the globe can expect severe and continued weather changes. We believe climate change is a grave and urgent risk to humanity, from hindering economic growth to catalyzing social unrest. To us, this latest report from the IPCC is not a shock. We have long known about this issue, understand the urgency of the problem, and have been doing something about it for the past 16 years of our professional lives. While many are tempted to look to the future for breakthrough technologies to save the day, we believe the technologies exist today that can be implemented in aggressive fashion to put a major dent in our carbon output. GEOS was created to invest in the solutions to our environmental challenges addressing many of the issues highlighted by the IPCC. We have also been informed by its work and findings, believing the challenges ahead, while daunting, are solvable. Interestingly, while we believe our holdings are all focused on providing solutions to climate change, many are also moving to make their operations climate optimal. Currently, we estimate 25% of our current GEOS holdings have pledged Net Zero goals.
The concerns stemming from the global equity market seem centered on the risks for a sustained inflationary cycle as well as economic disruption stemming from a rise in the COVID Delta variant. We would point to a key current GEOS theme, clean technology and efficiency, which can stand to profit from this scenario. We define clean technology as “doing more with less.” As companies operate in the face of rising costs and friction, be it inputs such as semiconductors, supply chain disruptions or a lack of labor for goods distribution, GEOS has exposure to solutions. For example, sensors, robotics and operational logistics management systems are solutions provided by GEOS holdings such as Kornit Digital, Sensata Technologies, Keyence and Trimble. Many of our holdings provide for greater economic activity in healthier fashion while lowering operating costs. This is a key element to clean technology, and one we believe is unrecognized by the market.
This commentary is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. The opinions and analyses expressed in this commentary are based on Essex Investment Management LLC’s (“Essex”) research and professional experience and are expressed as of the date of its release. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is intended to speak to any future periods. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.
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