The 2011 Climate Change Investment Awards Conference

UK Carbon budgets

Dr Kennedy told the audience that today the UK emits 670 MtCO₂e and that carbon budgets aim to bring this down to 159 MtCO₂e by 2050. He said that "shale gas is a major threat to de-carbonising society" while pointing in the near term to the importance of air source and ground source heat pumps in the UK to reduce energy demand. He recognised that "current policies have not delivered carbon reductions" and that we "need a step change in policy to reduce carbon emissions." He pointed to the upcoming electricity market reforms and the renewable heat incentives as government iniatives which would help to drive this step change.

The state of the Environmental Investment markets

There were a host of interesting speakers at the conference including Mark Campanale talking about the Pictet funds, Charlie Thomas from Jupiter on the environmental markets and Adam Frost from Sarasin who talked about the 'responsible' way to invest.  Charlie Thomas talked of a tipping point in consumer trends, which was going to drive environmental markets in the future. While also pointing out that "renewable companies trade at a discount to the S&P. Valuations are at distressed levels, with companies trading at three to three and a half times EBITDA, which suggests that they are either about to go bust, or are a significant opportunity in the future." This resonated with Richard Mercado from F&C who explained how little exposure their fund had to wind and solar, in fact selling completely out in June 2011. Charlie pointed to merger and acquisition activity as the bell weather for any change in sentiment in these stocks. "An important turning point to watch for will be when larger companies with a longer term view than the equity market start to buy companies."

Adam Frost from Sarasin took a slightly different approach, describing his "three inconvenient truths" which are:

• CO2 emissions since the Kyoto treaty have accelerated;
• Huge growth in markets has not led to good investments; and
• the cost of low carbon electricity requires £200bn in the next ten years - it is not a free lunch.

He pointed out that investment required responsible management, including engagement with policy makers, with companies and good stock selection.

The Investment Awards

The awards were presented this year by Lawrence Gosling and Dr David Kennedy and have been held annually since 2009. Mark Hoskin of Holden & Partners, one of the judging panel, said "It is important for investors to realise that while performance is important in selecting a winner, the judges also take into account their investment process, how well resourced the fund is and how committed the fund is to the market." 

This year’s winner for Best Climate Change fund went to F&C Global Climate Opportunities, with Richard Mercado, one of the speakers at the conference, there to collect the award. The fund has 9 investment themes chosen for their importance in policy changes, and potential for success, these are: Alternative Energy, Energy Efficiency, Sustainable Mobility, Waste, Advanced Materials, Forestry, Water, Acclimatisation and Supporting Services. The fund has a Governance and Sustainable Investment (GSI) team, which undertakes research in all potential investments, after which the stocks are put through qualitative and quantitative valuation analysis.

• Best Fund Management group:                                           Pictet Asset Management
• Best Clean Energy Fund:                                                        SAM Smart Energy fund
• Best Water, Food, Agriculture and Forestry fund:                   Sarasin Water fund.
• Best Development or Private Capital investment:                   Future Capital Partners
• Best new entrant:                                                                     Legal & General Global Enterprises fund 
• Award for innovation in Climate Change investment:              Henderson Global Investors

The awards shed light on how the sector is growing and changing. The funds entered into the awards are ways for investors to access investment opportunities that arise from climate and environmental change, all the listed funds are on the Worldwise Investor fund library together with investment themes such as: Clean Energy, Environmental and Multi-Thematic.