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As shareholders in Ørsted, we believe that M&G’s investors can profit from the growth of offshore wind while contributing to a positive long-term impact for the environment and society
Industry: Renewable energy
Headquarters: Fredericia, Denmark
How we generate the electricity that cools, heats and lights the places where we live and work will greatly dictate the future of our climate.
Around 37% of global carbon emissions come from electricity generation. How energy companies meet electricity demand, which the Intergovernmental Panel on Climate Change expects to increase by 43% over the next two decades, will therefore set the long-term trajectory of emissions.
Investors at M&G believe the energy sector’s transition towards renewable generation presents a structural long-term growth opportunity. Ørsted is a company at the vanguard of this transformation, and M&G is an investor in its shares.
The value of investments will fluctuate, which will cause fund prices to fall as well as rise and you may not get back the original amount you invested. The level of any income earned by the fund will fluctuate.
Ørsted has become a global leader in renewable energy, having built more offshore wind capacity than any other company worldwide.
Historically it had been a fossil fuel-focused business, as reflected in its former name – DONG (Danish Oil & Natural Gas) Energy. A decade ago, the company initiated its transformation, in its own words, “from a black to a green” energy company. The company sold its oil and gas production business in 2017, and aims to divest what is left of its coal exposure by 2020.
Rather than popular concerns about the wind not blowing or being a blight on seascapes, the growth of offshore wind generation was historically held back by its cost. Relative to traditional thermal fuels, it was initially much more expensive.
With the high environmental costs of relying on fossil fuels for electricity becoming harder to ignore, however, European countries have set ambitious targets for phasing them out.
For DONG, it became abundantly clear that continuing to focus on burning coal was not a strategy to deliver sustainable long-term returns – either for its shareholders or for society.
Ørsted in numbers
With investments in technology and infrastructure, the cost of producing electricity from offshore wind farms has fallen precipitously – by 63% in the past six years alone.
Key to lower costs is scale. The largest turbines, whose blades reach almost 200 metres above sea level – as high as the BT Tower in London – can each produce as much electricity as the first offshore windfarm that Ørsted built off the Danish coast almost 30 years ago.
Larger, more powerful turbines lower the costs of installing and maintaining wind farms, relative to the electricity generated. Extending existing farms – a tactic of Ørsted’s – lowers costs further by leveraging existing infrastructure to transmit electricity to the grid.
Today, Ørsted’s largest offshore windfarms are able to produce electricity more cheaply than burning either coal or gas.
Ørsted’s dominant position in offshore wind generations puts it in pole position to effectively capitalise on the industry’s expansion.
Importantly, the company is looking to grow responsibly and has committed to contributing to the greatest challenges facing society, as articulated in the UN Sustainable Development Goals.
Its scale and expertise make it well placed to deliver impact against Goal 7 – “ensuring access to affordable, reliable, sustainable and modern energy for all” – and Goal 13 – “taking urgent action to combat climate change and its impacts”.
As shareholders in Ørsted, we believe that M&G’s investors can profit from the growth of offshore wind while contributing to a positive long-term impact for the environment and society.
We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser.
This information is not an offer or solicitation of an offer for the purchase of shares in any of M&G’s funds.
Before subscribing you should read the Prospectus and the Key Investor Information Document.
This financial promotion is issued by M&G International Investments S.A., Registered Office: 16, Boulevard Royal, L-2449, Luxembourg and M&G Securities Limited (registered in England, No. 90776), authorised and regulated by the Financial Conduct Authority in the UK. Registered office: Laurence Pountney Hill, London EC4R 0HH. The Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários, the “CMVM”) has received a passporting notification under Directive 2009/65/EC of the European Parliament and of the Council and the Commission Regulation (EU) 584/2010 enabling the fund to be distributed to the public in Portugal.