The ESG devil is in the detail: how we decide what goes into our portfolios
By Oliver Jones - December 20, 2021
With ESG becoming an increasingly important part of the client/adviser conversation, we would like to share some details on companies that feature in our ESG portfolios and how they make a tangible difference to the world.
There are many examples of what we call “Impact in Action” to choose from but below I’ve picked out three companies (and the funds they sit in) that are focused on energy – specifically developing or supporting alternative sources to traditional power.
ITM Power is a UK company that designs and manufactures products that generate hydrogen gas for use in transportation, industrial processes and energy storage.
Hydrogen is typically produced by a process known as gasification. The issue with this process is that it requires organic materials (usually fossil fuels) as an input and as such releases carbon dioxide as a by-product. ITM Power, however, produces “Green Hydrogen” using tap water and excess renewable energy from the power grid. Therefore, not only do ITM Power produce a clean form of hydrogen, avoiding gasification, they also utilise renewable energy that would otherwise be wasted.
ITM Power is held in: Ninety One UK Sustainable Equity
Ninety One UK Sustainable Equity invests only in quality companies whose products and services are focused on contributing to a better, more sustainable future for society and the environment.
RENOVA is a Japanese renewable energy developer and power producer who develops, owns, and operates solar, biomass, wind, and geothermal power plants.
Japan has two main energy problems that RENOVA are playing a key part in solving. Firstly, Japan is still reliant on traditional fossil fuels for power generation: in 2020 31% of the total electricity supply came from coal power generation. Secondly, Japan has little in the way of its own energy reserves, and so lacks energy security as it is reliant on imports from other countries. By providing renewable energy sources, RENOVA is supporting Japan’s transition away from fossil fuels and providing energy security for the future.
RENOVA also appreciates its importance within the wider community and aims to positively contribute to the communities and local economies in which they are developing power plants.
RENOVA Inc. is held in: Montanaro Better World
Montanaro has identified six core themes that directly contribute to supporting the UN’s Sustainable Development Goals (UN SDGs): Environmental Protection, Low Carbon Economy, Healthcare, Innovative Technologies, Nutrition and Well-Being.
Montanaro will invest only in companies whose products and services contribute to at least one theme, and those having an impact. Montanaro defines impact as an activity that is intentional, additional, affordable, investable and reportable.
Green Bonds: Autonomous Community of Madrid
Green bonds are debt instruments issued specifically for the purpose of raising capital for environmentally friendly projects such as renewable energy generation and waste management. The International Capital Markets Association (ICMA Green Bond Principles) and Climate Bond Initiative (CBI Taxonomy Tables) have published guidance on what constitutes Green Projects.
The Autonomous Community of Madrid (Madrid’s Government) issued Green Bonds for 3 purposes: public transport that uses clean energy sources, environmental conservation and waste management. The funds raised from the green bonds have been specifically used for 3 projects so far:
An increase in the percentage of fully electric buses in the regions fleet. This included the purchase of 50 new electric buses and 15 electric micro-buses.
Full electrification of Madrid’s underground system
Maintenance and restoration of public parks, such as the Valdebernardo Park which is home to almost 200,000 trees.
Autonomous Community of Madrid Green Bonds are held in: NN (L) Short Duration Green Bond
NN (L) invests only in green bonds. Green bonds are debt issued with the sole purpose of funding green projects. NN (L) take this one step further with their “Dark Green” assessment of issuers, ensuring any green bonds purchased are aligned to The Green Bond Principles and The Climate Bond Initiative.
During 2022, I’ll be sharing more details of organisations/funds we believe are making a big difference in the move to a more sustainable world, so watch this space.
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