This green environmental thing isn’t just good for saving the planet. With forecasts for around 80% of all energy coming from renewable sources by 2040, I see exciting investment opportunities too. I’ve been investigating investment trusts that focus on this emerging industry.
Jupiter Green Investment Trust (LSE: JGC) is small, with a market-cap approaching just £57m. But since launch in 2006, the share price has climbed approximately 165%. It’s up 24.5% in the past 12 months.
The trust says it “invests globally in companies which have a significant focus on environmental solutions.” So it’s global, with under 6% of its funds invested in UK equities. I see almost nothing in the top 10 holdings that I recognise. Danish wind turbine manufacturer Vestas Wind Systems is there, as is Evoqua Water Technologies of the USA. Japan’s Azbil is in the mix too.
Not knowing these companies is unfortunate. But they appear to be profitable today rather than ‘jam tomorrow’ hopefuls. I’ll dig deeper to properly understand the inevitable risks, but I think this looks promising. At 265p, the shares are on a discount to net asset value (NAV) of around 6.5%, which adds to the attraction for me.
Waste services investment trust
The Impax Environmental Markets Trust (LSE: IEM) share price is up 42% over the past 12 months, and has gained 161% over five years. This investment trust is a bigger one, with a market-cap of a nearly £1.6bn. The trust targets companies providing cleaner energy, water and waste services.
With the shares at around the 540p level, it’s on a 6.8% premium to NAV. That, coupled with its more established market-cap, suggests investors see Impax as less risky than Jupiter Green. I see less personal risk because I am actually familiar with some of its investments.
Clean Harbors, a provider of environmental services, including hazardous waste disposal, which has been around for 40 years, is its top holding. Most of the holdings are American, with Pentair, another water treatment company, also in the top 10. Software firm PTC is there too, though I have yet to investigate its environmental angle.
Greencoat UK Wind (LSE: UKW) owns and operates wind farms across the UK. And we have plenty of the key asset here. It already supplies the likes of SSE and Centrica with power.
That strategy generates solid dividends, and yields over the past five years have been around the 4.5% to 5.5% range. Earnings have been a bit up and down, but the dividend has been nicely progressive. With big dividends, the shares haven’t gained as much as investment trusts seeking growth. But 17% over five years isn’t too shabby as a bonus on top of the income. It hasn’t really moved over the past 12 months though.
The share price of 135p represents a premium to NAV of around 4%. That sounds attractive to me. But there’s a specific risk here as the trust is invested in one specific business. More conventional investment trusts offer wider diversification, and that helps spread the investment risk.
There’s a speculative aspect to investment trusts like these, and with that comes risk. But pooled investments help to offset this. These are all ISA candidates for me.