In the early twentieth century rail was a dirty business, burning coal and competing with other transport on the basis of speed, price and luxury. Pollution wasn’t a factor.

French train builder Alstom produced steam engines in the 1920s and in due course replaced them with diesel. As train travel faced stiffer competition from cars and cheap air travel, Alstom diversified into energy and ship-building.

Today, trains are enjoying a revival. Travellers appreciate their comfort and speed. The industry promises to be more profitable. But that’s only half the story.

Nicholette MacDonald-Brown, Head of European Blend Equities, explains: “Alstom is a business that’s changed its spots. It sold its troubled energy business in 2015 and has settled down as a focused railway business. Today it looks set to benefit from plans to promote rail as a sustainable and safe mode of transport. There are two strands to this positive. One is that train technology is itself becoming far cleaner and more efficient. But the other part of the story is that more people and more freight are finding their way onto railways instead of using dirtier and more costly alternative transports.”

Overall demand for the shipment of people and goods globally is expected to rocket in the coming decades. Train travel will benefit. And tracks are being laid at breakneck speed to meet that demand. In China, more high-speed railways were built in a decade than exist in the whole of western Europe. New lines are being laid in Africa and the US, too.

Nicholette says: “Rail has the lowest carbon footprint amongst all major means of transport – rail travel has only an eighth of the carbon footprint of air travel and a third of road. As governments and companies live up to their emission-reduction targets, rail should benefit.

She continues: “Surprisingly, even airlines are encouraging customers to shift some of their travel to rail. KLM for example announced in 2019 that it wanted to encourage passengers to ‘make responsible decisions about flying’.”

Technology has been advancing too. Alstom has developed hydrogen-powered trains, which release only water as exhaust. They are already operating in Germany and other countries.

“Alstom’s Coradia iLint, the world’s first hydrogen powered train, can run for 600 miles on a single tank,” Nicholette says. “In the face of the climate crisis, demand for decarbonisation across transport is rapidly accelerating. Alstom is in a good place to benefit financially as these trends grow. And the environment benefits too.”

IMPORTANT INFORMATION:

INVESTMENT IN MUTUAL FUND CONTAIN RISKS, PRIOR TO INVESTING IN MUTUAL FUND, INVESTOR MUST READ AND UNDERSTAND THE FUND PROSPECTUS. PAST PERFORMANCE DOES NOT INDICATE FUTURE  PERFORMANCE.

The material is not intended as an offer or solicitation for the purchase or sale of any financial      instrument. It is not intended to provide and should not be relied on for accounting, legal or tax  advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can goes down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable, but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third   parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee that any forecasts or opinions will be realised. These views and opinions may change. 

PT Schroder Investment Management Indonesia is authorised as Investment Manager and regulated by Indonesian Financial Services Authority (OJK).