I’m not a big fan of watching the budget each year as the majority of points are so broad and generic that you can only really understand the implications once you’ve read the subsequent detail. This year’s budget has highlighted two areas that we are positive on within our portfolios; green energy and infrastructure.
Rishi Sunak announced that there will be a new UK Infrastructure Bank based in Leeds, that will have up to £22bn to invest alongside private capital in economic infrastructure, including transport, waste, water and clean energy. The UK’s public investment into infrastructure has been a bit muddled in recent years and large projects have heavily relied on private capital. Hopefully this initiative will give public investment into infrastructure a much needed boost. We invest in infrastructure, mainly in critical, social infrastructure and like the slightly dull characteristics!
Another interesting announcement was that the government want to raise £15bn in green bonds. In part this isn’t new as it was announced last Autumn that the government would issue green gilts, however this week’s announcement means that green savings accounts will be issued through the National Savings & Investment (NS&I) scheme. I think it’s a positive step to focus investment in green projects, especially for retail investors, however there has to be transparency in how the capital is used and financed. Whilst it sounds interesting, I wouldn’t expect higher interest rates for savers.
The move towards a cleaner economy cannot be underestimated. A lot of investors think it is gimmicky or something for the future; they are wrong. One of our key holdings is Impax Environment Markets (IEM), which is listed in London. It invests globally in companies focused in one of four key areas; new energy, water, waste recovery and sustainable food/agriculture. IEM has outperformed the global equity index (MSCI All Countries World) every calendar year in the last five years (as well as so far in 2021). It’s not been a fluke, it’s not a gimmick. Since we launched last April, we have been actively investing in IEM, together with a number of other areas focusing on sustainability.
Investing in a cleaner world is a long-term theme that should be incorporated into portfolios. There are lots of ways to do it, depending on your objectives and risk profile and it’s a really powerful way for individuals to make a positive contribution to society. My only caution is to be aware of ‘greenwashing’, where slick marketing can make it look like you are investing in green activities but it can be far from the truth. As always, do your homework and don’t invest in things that you don’t understand.
It’s an exciting area to be investing in and if it’s done properly, you’ll not only benefit from attractive returns but also from ‘doing the right thing’ by helping society and the environment.
If you’d like to know more about our approach, get in touch.
Thanks for reading and