Steve Freedman, senior product specialist, thematic equities, at Pictet Asset Management, explains why they hold building insulation company Kingspan (KGP) in some of their funds.
“As investors in environmental solutions, we look for companies that contribute to resolving environmental challenges with a business model that structurally benefits from doing this,” says Mr Freedman. “A prime example of this in the energy efficiency area is Kingspan, a world leader in building insulation known as building envelope technology. It helps its customers to build in an energy efficient manner that reduces running costs, and also meets environmental regulations and greenhouse gas emissions targets.
" When considering the potential for energy savings to make a significant dent on an economy’s carbon footprint, buildings are an often overlooked area. Based on energy consumption by end-use, buildings represent nearly 30 per cent of energy demand, according to the International Energy Agency. But Kingspan is uniquely positioned to help contain energy usage, carbon emissions and building operating costs.
"The company benefits from two powerful trends: rapid urbanisation, which could lead building floor area to almost double by 2050, and tightening regulations [that are leading to] low or net zero emission buildings. And this is increasing [demand for] insulated products.
"We expect Kingspan’s performance to be underpinned by its asset-light business model, attractive profitability, and smart organic and inorganic growth strategies. Through the development of innovative solutions and proprietary technologies, Kingspan maintains a technological advantage over competitors. Also, its research and development spending, as a percentage of revenues, is considerably above those of its peers. This is a key differentiator in a segment where technology is playing an increasingly important role.
"Kingspan based in Ireland but is active in over 70 countries.”
The company is listed on the London Stock Exchange and has a market capitalisation of €8.42bn (£7.38bn).
