hongkongen
Weighing the pros and cons of nuclear power as climate urgency grows

Weighing the pros and cons of nuclear power as climate urgency grows

12-07-2022 | Insight

Robeco has revised its stance on nuclear power as part of efforts to transition to a net zero economy.

  • Lucian Peppelenbos
    Lucian
    Peppelenbos
    Climate & Biodiversity Strategist

Speed read

  • Nuclear power seen as part of the energy transition, though risks remain
  • SDG Framework to assess and manage the risks of nuclear waste and safety
  • Exclusion will be removed in Sustainability Focused and Impact Investing ranges

While the nuclear industry retains significant risks, led by the potential for accidents and the problem of safely storing radioactive waste, its major advantage of having virtually zero emissions does offer a pathway away from reliance on fossil fuels.

The dynamics of the industry are also changing as nuclear technology gradually moves towards safer means of generating electricity and a better means of dealing with spent fuel. Meanwhile, the urgency to deal with potentially catastrophic global warming caused by burning fossil fuels is rising, along with the risks of energy security and energy poverty as families become unable to afford higher natural gas prices.

Taking all these factors into account, Robeco will drop dropped the exclusion of nuclear operators from its Sustainability Focused and Impact Investing ranges, which have higher sustainability criteria for portfolios. Nuclear power operators had been allowed in the Sustainability Inside range which has lower sustainability thresholds, a policy that will continue.

Stay informed on our latest insights with monthly mail updates
Stay informed on our latest insights with monthly mail updates
Subscribe

Restrictions remain

While outright exclusions will be removed, restrictions will still remain in place when assessing the suitability of a nuclear operator for any portfolio. Robeco’s proprietary SDG Framework for the Sustainable Development Goals will be used to carefully evaluate the risks.

The new policy coincides with a decision by the European Parliament on 6 July to label both nuclear power and natural gas as ‘green’ in the EU Taxonomy providing strict conditions are met. The Taxonomy aims to standardize definitions of sustainability across the 27-nation bloc.

The EU’s stance on nuclear power is similar to Robeco’s in recognizing its critical role in the energy transition. However, given the risks of nuclear safety and waste, Robeco believes nuclear is ‘amber’ rather than ‘green’, as reflected in the SDG framework.

Playing a role in net zero

“In any scientific scenario, nuclear power plays a role in the energy transition, because without it the energy transition simply becomes much more costly,” says Lucian Peppelenbos, Climate Strategist at Robeco.

“Next to massive investments in renewable power, we also need investment in new-generation nuclear technologies for baseload capacity.”

“We are well aware of the risks of nuclear technologies. But interestingly, if you look at the statistics over the past decades, then nuclear is one of the safer energy technologies out there, certainly in comparison to any fossil fuel. That includes all the deaths that happened in Fukushima and Chernobyl. Statistically, it is a relatively safe technology, but of course, it's one with very heavy tail risks.”

“So you need to manage those risks very, very well, for which there is a recognized system run by the International Atomic Energy Agency that sets out all sorts of standards and reviews. We feel we can rely on such a system, and countries that score well on nuclear safety are the ones for us that are investible.”

Despite high profile tragic accidents such as at Chernobyl and Fukushima, nuclear power has one of the lowest death rates of energy sources, along with the lowest emissions. Source: Our World in Data.

What to do with the waste

A growing role for nuclear power in the energy transition hinges on effectively resolving the waste issue. “The world has a backlog of about 250,000 tons of highly radioactive waste which requires permanent storage solutions,” Peppelenbos says.

“The first permanent storage facility of this kind is being built in Finland and will open in 2025. They bury the toxic waste deep in the ground in ultra-stable bedrock. The stored waste would though need to be tracked for a long time before it’s fully proven that it’s a solution.”

“Other countries like Sweden, France and the UK are also developing permanent storage facilities. Technology development in this area is critical. In our assessment framework, we will review whether nuclear power companies and their host countries have concrete plans for permanent waste storage.”

Move to new-generation technologies

New-generation nuclear technologies focus on minimal waste and enhanced safety. There is also the longer-term promise of moving away from nuclear fission, which has been the means of generating power since the 1960s, to the fusion era. Nuclear fission splits the atom to create the energy in power stations, and is also used in nuclear weapons. Nuclear fusion merges a hydrogen atom into helium to create energy – in the same way that the sun does – and is much safer.

The expected progression of nuclear power reactors in the 2020s and beyond. Source: IAEA, Robeco

“A key point to make about nuclear fission is that it’s still the technology that we're using today since the first nuclear power installations in the 1960s,” Peppelenbos says. “Now, new generation technologies have been developed, and will continue to be developed.”

“We want that technological innovation to be able to play out well for the future solutions that are necessary. And that's why we don't want to exclude it.”

Giving the amber signal

One question to answer following the policy revision is whether nuclear power is now being viewed as sustainable. It’s not completely green like wind or solar power… but it’s not as bad as oil or coal.

“We say that nuclear is not necessarily green, but it's not necessarily grey either,” says Peppelenbos. “It's somewhere in between, and therefore some call it amber. But given that the industry has virtually zero emissions, it does have a role to play in the net zero transition.”

Robeco has signed a net zero carbon pledge which commits the firm to making all assets under management carbon neutral by 2050, in line with international agreements. This sometimes means taking a broader view as priorities change, while accepting that there is no perfect solution to any sustainability issue, Peppelenbos says.

The bigger battle

In all, it’s vital to see the bigger battle against climate change, the risks for which are mounting daily, Peppelenbos says. “In recent years we have witnessed growing impacts and risks of climate change, and increased support from science and policymakers for nuclear power,” he says.

“In that context, our assessment of nuclear opportunities and risks has shifted to a more positive balance, in which we continue to be critical of the associated risks, but we will no longer exclude. An outright exclusion would not be justified given the current state of climate affairs.”

Important information

The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.

Logo

Disclaimers

1. General
Please read this information carefully.

This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.

2. Important risk disclosures
2. Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:

  • Some Funds are subject to investment, market, equities, liquidity, counterparty, securities lending and foreign currency risk and risk associated with investments in small and/or mid-capped companies.
  • Some Funds are subject to the risks of investing in emerging markets which include political, economic, legal, regulatory, market, settlement, execution, counterparty and currency risks.
  • Some Funds may invest in China A shares directly through the Qualified Foreign Institutional Investor (“QFII”) scheme and / or RMB Qualified Foreign Institutional Investor (“RQFII”) scheme and / or Stock Connect programmes which may entail additional clearing and settlement, regulatory, operational, counterparty and liquidity risk.
  • For distributing share classes, some Funds may pay out dividend distributions out of capital. Where distributions are paid out of capital, this amounts to a return or withdrawal of part of your original investment or capital gains attributable to that and may result in an immediate decrease in the net asset value of shares.
  • Some Funds’ investments maybe concentrated in one region / one country / one sector / around one theme and therefore the value of the Fund may be more volatile and may be subject to concentration risk.
  • The risk exists that the quantitative techniques used by some Funds may not work and the Funds’ value may be adversely affected.
  • In addition to investment, market, liquidity, counterparty, securities lending, (reverse) repurchase agreements and foreign currency risk, some Funds are subject to risk associated with fixed income investments like credit risk, interest rate risk, convertible bonds risk, ABS risk and the risk of investments in non-investment grade or unrated securities and the risk of investments made in non-investment grade sovereign securities.
  • Some Funds can use derivatives extensively. Robeco Global Consumer Trends Equities can use derivatives for hedging and efficient portfolio management. Derivatives exposure may involve higher counterparty, liquidity and valuation risks. In adverse situations, the Funds may suffer significant losses (even a total loss of the Funds’ assets) from its derivative usage.
  • Robeco European High Yield Bonds is subject to Eurozone risk.
  • Investors may suffer substantial losses of their investments in the Funds. Investor should not invest in the Funds solely based on the information provided in this document and should read the offering documents (including potential risks involved) for details.

3. Local legal and sales restrictions
The Website is to be accessed by “professional investors” only (as defined in the Securities and Futures Ordinance (Cap.571) and/or the Securities and Futures (Professional Investors) Rules (Cap.571D) under the laws of Hong Kong). The Website is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of the Website is prohibited. Persons in respect of whom such prohibitions apply or persons other than those specified above must not access this Website. Persons accessing the Website need to be aware that they are responsible themselves for the compliance with all local rules and regulations. By accessing this Website and any of its pages, you acknowledge your agreement with understanding of the following terms of use and legal information. If you do not agree to the terms and conditions below, do not access this Website or any pages thereof.

The information contained in the Website is being provided for information purposes.

Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.

4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.

5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.

6. Third party websites
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage. Third party off-site pages or websites are provided for informational purposes only.

7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.

8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.

9. Privacy
Robeco guarantees that the data of persons accessing the Website will be treated confidentially in accordance with prevailing data protection regulations. Such data will not be made available to third parties without the approval of the persons accessing the Website, unless Robeco is legally obliged to do so. Please find more details in our Privacy and Cookie Policy.

10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong. 

Please click the “I agree” button if you have read and understood this page and agree to the Disclaimers above and the collection and use of your personal data by Robeco, for the purposes for which such data is collected and used as set out in the Privacy and Cookie Policy, including for the purpose of direct marketing of Robeco products or services. Otherwise, please click “I Disagree” to leave the website.

I Disagree