Clean energy fund that’s 50% up in one year

COUNTRIES around the world are falling over themselves to announce bold ambitions for a transition to clean energy.

Europe and the UK are targeting net zero carbon emissions by 2050, China by 2060, while the US hopes to be the world’s clean energy superpower. More target setting and grandstanding from governments is likely at, and in the lead-up to, the Cop26 Climate Change conference to be held in Glasgow in November.

There are questions about whether they have the strategies and political will to achieve their targets. But one thing is certain: transitioning to clean energy is going to take money – and lots of it. Already countries have pledged trillions in investment.

So it’s perhaps no wonder that co-manager of Guinness Sustainable Energy Fund, Jonathan Waghorn, believes there are opportunities for investors in the energy transition.

‘There is a global movement away from fossil fuels and towards low carbon energy,’ says Waghorn. ‘We look for the companies that will benefit. Not the fossil fuel companies that have to go through the transition, but those firms finding solutions that are already green and clean.’

The £544million fund is made up of 30 companies, which Waghorn and his team aim to hold for three to five years. They invest wherever in the world they see opportunities. The fund is 40 per cent invested in companies based in the US, 11 per cent in China, seven per cent in South Korea, and the remainder split in between nine other countries including Germany, Canada, Spain and France.

Waghorn, following the same principle as all Guinness fund managers, keeps his holdings equally weighted and rebalances regularly. ‘This approach keeps things simple as it means we’re not worrying about what weightings we should give to any one holding,’ he says.

‘By limiting ourselves to 30 holdings, we need to sell if we want to buy. Remembering to sell is far harder than buying, so this strategy maintains discipline.’

The fund is split into two elements: companies producing clean power and those providing efficiency solutions to reduce energy consumption.

One that fits into the latter category is ON Semiconductor, a US company that manufactures components used in electric vehicle charging points. Waghorn is always seeking out value and this company offers a way to invest in the popular theme of charging points, but at a reasonable price.

Similarly, he invests in Chinese solar glass manufacturer Xinyi Solar, which offers exposure to solar power, but in a low-cost way.

‘It is one of the largest and bestquality producers, offering value in an industry that is still very volatile,’ says Waghorn. As with any specialist fund, Waghorn believes Guinness Sustainable Energy should only form a component of a welldiversified global portfolio.

However, he believes that over time, the sustainable energy theme is poised to outperform other global stocks on average.

In addition, the fund tracks the tons of carbon emissions saved by the activities of the companies in which they invest. They believe that for every $1million (£727,000) of portfolio assets, 1,174 tons of carbon dioxide are not emitted that would have been otherwise. That is the equivalent of the energy consumption of 135 households for one year.

Guinness Sustainable Energy has turned a £1,000 investment into £2,253 over three years, following a particularly impressive growth spurt of 50.4 per cent over the past year. The fund has an ongoing charge of 0.69 per cent and its stock market identification code is B3CCJ63.