The Allianz RCM Global EcoTrends fund, an open-ended investment company with €1.7bn ($2.7bn) in assets is not a ‘green’ fund, but an environmental technology fund, says manager Bozena Jankowska.

The fund does not claim to be ethically-minded. About 75 per cent of the portfolio is invested in companies in three areas: eco-energy, pollution control and water. Ms Jankowska is a bottom-up stock picker who relies on fundamental analysis. As much as 20 per cent of the fund is invested in emerging markets. The fund is aimed at long-term investors who are willing to take on more risk. Ms Jankowska relies on research from RCM’s EcoTrends team, which was set up seven years ago.

“We look at the relevance of a company; we look at the quality of the management, the quality of the business. We look at the valuation and then that helps us decide whether we ultimately would like to hold the stock or not,” explains Ms Jankowska. “For example, we would want to look at companies that have a technological edge. So, how differentiated are they? What are the barriers to entry? Are they participating in a sector that has strong regulatory support? Is that support transparent, how long term is it?

“Also, we look at the growth prospects of a given sector and the sustainability of earnings of the companies,” she continues.

No calls are made on sectors or regions. But most of the exposure is in Europe where more environmental companies are based. And Ms Jankowska admits to being positive on the wind generation sector, but more cautious on solar power.

Favoured companies include Gamesa, which offers exposure to the wind sector and Thermo Fisher Scientific, a player in the environmental, health and safety testing market. “We like Gamesa because it provides exposure to the wind sector, which we currently are positive on, is looking attractive from a valuation stand point and has good visibility on earnings,” says Ms Jankowska.

Performance has been dragged down by the fund’s exposure to the solar sector in the wake of the recent pullback in share prices in the sector. Since the start of the year three solar holdings reported results, which disappointed the market – Renewable Energy Corporation, Siemens and Veolia Environment. But Ms Jankowska remains positive on these companies in the long-term. “This has been a factor of investors, particularly non-specialist investors, taking their money off the table following very strong returns for solar in 2007,” says Ms Jankowska.

Top holdings include Vestas Wind Systems, Suntech Power Holdings, First Solar, Stericycle, Novozymes and Suzlon Energy.

The rising sums poured into wind turbines, solar power, energy efficiency and other low-carbon forms of energy reflect a combination of factors, analysts say. These include climate change concerns, high energy prices and a desire by many governments to diversify their energy supply in the interests of security.

The sector is diverse, populated by a variety of small specialists, start-ups and other young companies, alongside a sprinkling of large, established companies, Ms Jankowska says.