The transition to renewable energy sources has gained momentum in Europe since Russia invaded Ukraine in early 2022, as the European Union began to implement new policy efforts, leading to a notably improved growth outlook for certain companies, according to Fidelity Portfolio Manager Faris Rahman.
“In Europe, including the Nordic region, Russia’s offensive set into motion a dire energy crisis for the Continent because much of Europe depends on Russia for its energy needs,” says Rahman, who manages Fidelity® Nordic Fund (FNORX) alongside Allyson Ke.
The fund is a regional equity strategy that seeks long-term growth of capital by investing primarily in the securities of Danish, Finnish, Norwegian, and Swedish issuers, and other investments that are tied economically to the Nordic region.
In co-managing the fund since 2021, Rahman and Ke favor companies with compelling growth prospects that generate returns above their cost of capital over a market cycle.
That has led them to compelling opportunities in Europe. Rahman explains that the European Union, to reduce its reliance on fossil fuels and Russia, is planning a massive investment to transform its energy mix, with a heavier emphasis on renewables. “While the shift to renewable resources was already well on its way, we believe these new, supportive policies from the EU are helping to propel the expansion of renewables globally,” he says.
To capitalize, the co-managers have favored companies such as Sweden’s Sandvik (SDVKY), the fund’s seventh-largest holding as of October 31. Sandvik is a high-quality maker of underground mining equipment, operating in a global duopoly with high barriers to entry, and selling mainly aftermarket services with an asset-light business model, notes Rahman.
Global demand for copper, nickel, and zinc—all materials that Sandvik’s products and services help mine—has increased due to their importance in electric vehicles and the expansion of the electric grid, Rahman says, adding that he believes the increased need for new-market materials could help drive long-term growth for the firm.
Denmark-based wind turbine manufacturer Vestas Wind Systems (VWDRY) was another major holding at the end of October. With a renewed focus on energy security in the wake of the Russia–Ukraine conflict, as well as supportive government-sponsored subsidies for renewable energy efforts, demand for and the pricing of Vestas’s products and services has increased, notes Rahman.
“Allyson and I believe the shift to renewables represents a multiyear investment opportunity, and we continue to prefer companies that meet our investment criteria and are well-positioned amid this powerful transition,” says Rahman.
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Faris Rahman is a portfolio manager and research analyst in the Equity division at Fidelity Investments.
In this role, Mr. Rahman manages Fidelity International Equity Central Fund – Consumer Discretionary sub-portfolio and comanages Fidelity and Fidelity Advisor Europe Fund and Fidelity Nordic Fund. Additionally, he is a consumer discretionary research analyst currently focusing on the European luxury, retail, and online food delivery industries.
Prior to assuming his current role, Mr. Rahman was a research analyst on the emerging markets team and covered the consumer staples and telecommunications sectors.
Before joining Fidelity in 2012, he was an investment banker at Morgan Stanley and a private equity investor at Hellman & Friedman and J.W. Childs in New York and Boston.
Mr. Rahman earned his bachelor of arts, with honors, in economics and engineering sciences from Dartmouth College and his masters of business administration from The Wharton School of the University of Pennsylvania.