14 February 2025
With Donald Trump reacquaintance with the US Presidency well under way, DeepSeek’s burst onto the artificial intelligence scene and interest rates expected to remain elevated, the Quilter Cheviot sustainable investment team has taken the opportunity to add new holdings into the Climate Assets Balanced fund.
Following the recent sell-off in artificial intelligence-focused names, technology giant Nvidia has been added to the fund after it fell nearly 20% towards the end of January. As a result of the macroeconomic backdrop, insurance firm Allianz and testing company Intertek have also been introduced to the portfolio.
Harry Gibbon, investment manager within Quilter Cheviot’s sustainable investment team, explains the rationale for each new holding, and how these align with the UN’s Sustainable Development Goals (SDGs) – a crucial factor the team uses when assessing companies’ sustainability characteristics.
Nvidia
“Despite all the fanfare of DeepSeek and its supposed ability to create large language models in a less capital-intensive manner, Nvidia remains the leader in the design and production of Graphics Processors Units (GPUs). These GPUs act as the brain of computers, robots, medical imaging equipment, gaming consoles and self-driving cars and this isn’t going to simply disappear overnight. Notably, over 90% of the supercomputers around the world are powered by Nvidia so it has a dominant position and thus the dramatic market reaction created a great buying opportunity.
“Whilst we expect market returns to broaden out this year, we still expect the tech sector and the Magnificent Seven to do much of the heavy lifting. Following its recent share price falls, Nvidia now has a much more balanced risk reward return profile and thus is a good time to take advantage of favourable metrics for a company that remains at the forefront of the vast majority of global economic activity.
“From a thematic viewpoint we like that Nvidia promotes ‘resource efficiency’, as its GPUs are 40 times more energy efficient than traditional servers. Furthermore, given their use in the medical world, the company has strong revenue alignment with multiple SDGs. We do recognise that this world is an energy intensive sector, but Nvidia is committed to 100% of its global energy use, for offices and datacentres, to come from renewable sources by the end of 2025. A more detailed decarbonisation strategy is needed but for now Nvidia is heading in the right direction in this regard.”
Allianz
“The insurance industry plays a key role in accelerating the energy transition, protecting against extreme weather events, and supporting recovery post-catastrophes. Given this, it makes sense to have exposure to one of the world’s leading insurers and financial services providers in Allianz. We like the resilience of its business model offering, diversifying by business segment and geography. Its health and life insurance products and services contribute to the target of achieving universal health coverage, including financial risk protection and access to quality healthcare services – making aligned to the SDGs.
“Furthermore, premiums are rising in the non-life insurance space, and Allianz has good exposure to those markets. The company is well-established in the US which we like as it has strong sensitivity to the US dollar and stands to benefit from a higher interest rate environment. Allianz also offers an attractive dividend yield of around 4.5%, giving investors potential for both a solid income and good capital returns.”
Intertek
“The testing, inspection, and certification (TIC) industry has seen robust growth in recent years and there is no sign of this slowing down. As such, a company such as Intertek, offers huge potential due to it being a global leader underappreciated by the market. Intertek’s services cover the whole supply chain, including the sourcing of raw materials, product design, manufacturing processes, compliance certifications and performance testing of the end-product.
“We think investors underestimate Intertek’s diverse and global footprint. It only generates about 18% of its revenues from China, and less than 3% of group revenue is generated from US consumer testing exports, so it should be fairly well insulated from Donald Trump’s tariff regime. Indeed, the narrative of the negative impact of tariffs on Intertek has perhaps been overdone as US tariffs will focus on heavy industrial manufacturing end-markets (like cars and big electronics), rather than the average Intertek customer (like consumer products or pharmaceuticals). The business experienced a big sell off in its share price at the end of last year and looks undervalued compared to its long-term average.
“From a sustainability perspective, the company’s ‘Products’ sector provides various services for ensuring workplace health and safety, including laboratory safety, second-party supplier auditing, process performance analysis, facility plant and equipment verification, and third-party certification. Its ‘Supplier Auditing Services’ sector also focus on human rights, labour standards, and environmental management, thus making it a positive contributor to the SDGs.”
