David Kimberley
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Updated 13 Jul 2023
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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.

  • In the year to 31/03/2023, Jupiter Green (JGC) delivered share price total returns of 6.7%. NAV total returns were close to flat over the period, falling by 0.4%. In contrast, the trust’s benchmark, the MSCI World Small Cap Index, declined by 5.2% over the period.
  • Performance during the period was driven in part by the war in Ukraine and the passage, in July of last year, of the Inflation Reduction Act in the US. Russia’s invasion of Ukraine has acted as a push factor, driving European countries to increase their existing investment in renewables, while US policy has provided strong impetus for investment in the types of companies JGC invests in.
  • The trust’s discount tightened from 18.7% to 13.4% over the year, although it has widened again to 16.6% since the period end. The discount tightening was partly due to the trust’s buyback mechanism, with the JGC board repurchasing 328,726 shares over the period, equal to approximately 1.6% of shares in issue. Shares were repurchased at an average discount of 14.4% to NAV.
  • Companies that fit in JGC’s Clean Energy theme were key drivers of positive returns for the trust during the period. Solar panel manufacturer First Solar was the standout performer, delivering total share price returns of close to 180% over the period, driven heavily by the passage of the Inflation Reduction Act.
  • Detractors to performance skewed towards holdings that fit in JGC’s Sustainable Agriculture and Land theme. Companies that fit within this theme derive a higher proportion of their revenue from Europe. Concerns about rising energy costs and a recession on the continent likely contributed to poorer performance in this area.
  • The JGC managers initiated new positions in several stocks. Leading engineering software firm Ansys was one example, with the firm releasing a strong set of financials in February of this year that helped drive performance for JGC. The managers also added to existing holdings in the semiconductor companies Infineon and Monolithic Power.
  • JGC Chair Michael Naylor said: “The Jupiter Environmental Solutions team has a long-established record of investing in emerging and established green technologies, and it is their long-held conviction that solving environmental challenges will be critical to continued global development. Addressing both the causes and effects of these climate challenges will become inevitable, and as such Environmental Solutions as an asset class are no longer deemed peripheral. The development of technologies through innovation are key to combatting the world's climate and environmental crisis.”

Kepler View

Jupiter Green (JGC) has a wide remit that enables it to invest in companies providing solutions to the plethora of environmental problems the world faces today. The smaller size of the trust means Manager Jon Wallace can be more flexible and invest in smaller, fast-growing companies that offer greater long-term growth potential to investors.

The pressing need to develop these solutions is hardly a novel phenomenon – that JGC was launched close to two decades ago is indicative of that. However, the past 12 months have shown both the practical benefits of clean energy solutions, as well as how seriously governments globally are taking climate change.

With regard to the former, Russia’s invasion of Ukraine has shown how fragile our energy supplies can be. Although alternative supplies of hydrocarbons may be available, governments are realising that renewables aren’t just good for the environment, they also lead to far greater energy independence. At the same time, the passage of the Inflation Reduction Act seems likely to spur a huge wave of investment in environmental solutions of the sort that JGC invests in. The piece of legislation contains $500bn in new spending and tax credits, according to consulting group McKinsey.

Despite these tailwinds, it was a volatile year for JGC, as illustrated by its discount, which traded within a c. 20% range band in the 12 months to 31/03/2023. Despite tightening during the period, the discount has since widened again to 16.6% as at 13/07/2023. Looking back at the past decade, the trust has traded at its widest discount to NAV over the last 18 months. That seems likely to have been driven by fears about the viability of smaller companies in a recession and wider volatility stemming from the war in Ukraine. Some companies in the portfolio were also impacted by the froth we saw in markets during 2020 and 2021.

Understandable though these concerns may be, we think JGC now sits at an interesting juncture. The trust saw a decline in NAV at the end of 2021, as inflation came into play and rate hikes began, which it is yet to fully recover from. At the same time, the trust’s shares continue to trade at close to a record discount to NAV. Fundamentals for companies in the portfolio remain largely strong and the trust managers have also been prudent in their use of gearing.

As a result, if there is negativity to come then a lot of it has arguably already been priced in – with the trust’s discount providing a cushion against any further downturns. Given the positive momentum behind the companies the trust looks to invest in, it may be the case that this proves to be an attractive entry point for investors in the trust.

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