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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Jupiter Green. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Yesterday Jupiter Green (JGC) released its interim results for six months ending 30 September 2020. Over the reporting period, the undiluted NAV per share rose by 27.6%. Adding back the dividend paid of 1.3p, this gives a return of 28.4% in comparison to a 27.7% gain from the benchmark the MSCI World Small Cap Index. The share price increased by 27.1%, with the discount marginally widening. The Chairman said that, while the last six months has been dominated by COVID, “clean energy and other sustainable solutions will be at the heart of recovery plans and key to a reinvigorated post-Covid economy”.

Looking forward the team at JGC continue to believe that climate change remains one of the most pressing long-term challenges facing the world. The Chairman stated that climate change “is a long-term problem that will need long-term solutions, which is why we feel that environmental and sustainable themes can present multi-year, indeed even multi-decade, opportunities”. The team at JGC will be looking to take advantage of these opportunities, particularly in the current ongoing market turmoil.

Kepler View

Over the six month reporting period the returns of JGC have been in line with the benchmark. The trust was particularly resilient during the market sell-off, although this was likely a result of the larger-cap bias that the trust still had at the time. In September the board announced a shift in strategy and we have seen a number of changes to the portfolio. The trust now has significantly greater exposure to smaller and more innovative companies, whilst the larger ‘established leaders’ have been reduced relative to their historic weighting. Since the end of September, to 14 December 2020, the trust has delivered NAV total returns of 11.3%, in comparison to the new benchmark MSCI World Small Cap Index of 15.5%. The AIC Environmental peer group has delivered NAV returns of 12.0%.

Charlie Thomas, who heads the investment team, now looks for opportunities within seven themes, which can be seen in greater detail here. The uncertainty of COVID-19 has enabled him to take advantage of stock price volatility and invest in companies which he believes will help to ‘build the world back better’ after COVID-19.

According to Charlie “Climate change and Covid-19 are both systemic risks that must be faced collectively. The pandemic has brought into focus the acute nature of such risks and presented an opportunity to redirect financial and political capital towards solving them, and as a means of reinvigorating economic growth”. An example has been the EU's Covid-19 recovery package, which involves investment in renewable energy, clean hydrogen, batteries, and sustainable energy infrastructure. Meanwhile, Joe Biden has called for a US$2tn investment in clean energy to address the climate crisis.

The changes to the strategy and portfolio mean that the team are ready to take advantage of these developments. The manager believes that some companies in the portfolio currently present multi-decade investment opportunities, and JGC will continue to offer focused and specialist exposure to them. JGC currently trades on a premium of 2.5%.

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