Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by Jupiter Green. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
In recent years, environmental, social, and governance (ESG) investing has been an area of great interest, and this has only been exacerbated by the COVID-19 pandemic which has underlined the potential impact of true systemic risk.
In fact, assets under management within ESG ETFs have increased three-fold from just under $59bn at the end of 2019 to $174bn at the close of 2020, according to data from TrackInsight, an ETF data provider.
Driving the growth in the area has been the ‘win-win’ scenario presented via marketing to investors, where they can help the planet whilst generating attractive returns.
Thus far this has largely been proven true by Morningstar, who in 2020 conducted study into 745 ESG funds. They found that of the 745 funds the majority have done better than non-ESG funds over one, three, five and 10 years. Furthermore, the study demonstrated that sustainable funds have greater survivorship rates than non-ESG vehicles.
With an increasing number of ESG funds being launched, it can be easy to get lost in the noise of the area. As such, we look at a trust which has been paving the way for environmentally conscious investing, utilising a clear and concise investment profile to identify companies which are delivering solutions for the environmental challenges the world faces.
Jupiter Green: Unlike other Greens we can think of, making the world a better place.
Jupiter Green Investment Trust (JGC) was launched in 2006 with the aim of investing in companies which are developing and implementing solutions for the world’s environmental challenges.
Jon Wallace is now at the helm of the trust, taking over from long-term manager Charlie Thomas earlier this year, having worked alongside him on JGC since 2014.
This has been a smooth transition due to Jon’s in-depth knowledge of the portfolio and has coincided with the board’s decision to evolve the focus of the trust towards smaller, more innovative companies – an area in which Jon has extensive experience.
Despite the changes to the trust, the process has remained largely the same and the team categorise companies in the portfolio into ‘established leader’, ‘accelerator’, or ‘innovator’ depending on the maturity of each business and the potential growth trajectory.
The portfolio is typically made up of around 60 holdings which they have identified as providing solutions – often technologically based – to environmental challenges.
When identifying opportunities Jon looks at the structural drivers which will support a company’s products and services. He usually arranges around the ‘three Ps’ – people (end markets), policy (regulation) and progress (technology).
The team also categorise companies based on seven themes which run throughout the portfolio, and focus in on those companies which they see as most interesting.
We illustrate each theme and a company within this theme in the table below.
|Circular economy||Borregaard||Operates bio-refineries using Norwegian spruce to make natural and regenerative solutions that displace oil-based chemicals across packaging and ingredients.|
|Clean Energy||Orsted||Renewable energy company that takes tangible action to create a world that runs entirely on green energy.|
|Water||Xylem||Provides solutions for the full cycle of water from collection, distribution and use to the return of water to the environment.|
|Mobility||Horiba||Manufactures and markets measuring instruments and analysers.|
|Energy Efficiency||A.O. Smith||Manufacturer and supplier of water heaters; applying innovative technology, it develops energy-efficient water-heating solutions.|
|Sustainable Agriculture, Nutrition and Health||Cranswick||Producer of high-welfare pork products, including free range and organic sausages.|
|Environmental Services||RPS Group||Provides environmentally conscious project management for property, energy, transport, water, resources, defence and government services.|
Looking forward Jupiter Green is in an exciting position and offers a highly differentiated proposition when compared to its global fund peers.
The change of emphasis in the portfolio has interesting implications for JGC and offers investors exposure to more dynamic, innovative and high-growth companies – many of which will benefit from the COVID-19 global economic stimulus measures whilst promising to “build back better”.
Currently JGC is trading at a premium of 5%, after seeing sentiment significantly improve over the past few months.
However, given the raised awareness of the threat of climate change and the new opportunities the change in strategy presents, we think it fair to assume that the valuation gap between JGC and Impax Environmental Markets (at a premium of 10%) might narrow further if JGC’s performance continues to support it.
To read more about the JGC and how they are offering attractive returns to investors, click here
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