ECOFIN US RENEWABLES INFRASTRUCTURE TRUST: Clean energy fund delivers for investors… and the planet
The United Nations Climate Change Conference starts today in Glasgow under the chairmanship of former Business Secretary Alok Sharma.
Over the next two weeks, he will attempt to persuade the world’s political leaders and their aides to make fresh commitments to radically reduce greenhouse gas emissions in order to save the planet. The aim is for net zero emissions by 2050.
Although Boris Johnson has already said it is ‘touch and go’ whether the conference will do enough to prevent irreversible climate change, it ought to focus everybody’s minds – consumers as well as politicians – on the need to become more environmentally conscious.
On Thursday, the conference will concentrate on ways in which to accelerate the switch from fossil fuels (oil and gas) to clean energy through wind turbines and solar panels. The transition is already underway. According to research company GlobalData, wind turbines should be able to provide nearly 13 per cent of all energy needs by 2025, compared to 9.5 per cent last year.
Investment managers are waking up to the opportunities in clean energy. They are launching funds that invest in the infrastructure behind clean energy – solar panel and wind farms – with the promise of a half-decent income to investors on the back of the energy they then sell to suppliers.
One investment trust doing this is Ecofin US Renewables Infrastructure, a £123million fund listed on the London Stock Exchange. In recent days, it has announced a $49 million (£35 million) investment in Whirlwind, a Texas-based wind farm, comprising 26 wind turbines. This complements its existing portfolio of investments in solar panels.
It has also confirmed its third quarterly dividend payment to shareholders since the trust launched in December last year – 0.8cents (0.583pence) a share, taking the income paid so far, or about to be paid, to 1.8cents (1.3pence). The trust’s board is confident the fund will hit its target income in the first year of between two and three per cent, then growing to five per cent plus once the trust is fully invested and all the assets are operational (some are still under construction). Income growth will also be fuelled by fixed increases in revenues agreed with some of the companies it is supplying energy to. It hopes, too, to drive down the maintenance costs of the farms it owns.
US-based Jeremy Polacek, who runs the fund, says the wish is to ‘deliver a stable and growing income’ with a bit of capital growth over the long term. Diversification, he adds, is one of the trust’s main attractions. The portfolio is geographically spread across the US – with farms on both the East and West Coast (especially in Massachusetts and California) and is invested across solar and wind. It also provides an alternative income source for investors.
Although investment experts like the trust, they believe it is too early to judge whether its concentration on the US renewables energy market will prove successful. Ryan Hughes, head of investment research at wealth manager AJ Bell, says: ‘Ecofin has a heritage in environmental investing that many will be envious of. But it will take time for the trust’s assets to be considered a fully operational portfolio. Some investors may also prefer a more diversified fund – the likes of Gravis Clean Energy Income.’
The stock market identification code for Ecofin US Renewables Infrastructure is BMXZ812 and the ticker is RNEP. The fund’s charges are 1 per cent, although these will fall if the assets grow.