“In April this year, we decided to bring the Jupiter Ecology fund into the IBOSS Sustainable portfolios. We believe the fund has a more diverse range of assets than many other global equity funds and additionally it has a more value bias.
The Jupiter management team is also very experienced, with a fund history dating back to 1988. In our opinion, this level of experience could be particularly valuable in an area of the market which attracts a great deal of money and interest.”
– Michael Heapy, IBOSS Fund Analyst
by Jon Wallace, Fund Manager, Jupiter Ecology Fund
The Jupiter Ecology Fund was launched over three decades ago, with an investment thesis founded on two predictions. First, that long-term environmental challenges – many of which were then only beginning to emerge – would present major challenges to global development, and ultimately shape it, while those same challenges would, over time, shape investment markets too.
The rise of ‘ESG investing’ in its various forms, highlights that this view has undoubtedly become mainstream. Over the years the conversation on ESG has developed from debate about whether environmental, social and governance issues would have a significant bearing on investment returns, to one centred on how investment portfolios can manage the risks and capture the opportunities. The Covid pandemic has only accelerated this narrative.
It is the latter, the opportunity set, that has always been the focus of the Jupiter Ecology Fund. This reflects the second of the predictions at the heart of the Fund’s investment philosophy: that within global equities, a subset of companies focused on solving the key challenges would emerge and they would benefit from strong structural demand.
This approach is distinct from finding companies that are acting responsibly towards managing their own impacts, instead focusing on those companies able to deliver solutions to global problems. Take for example the burgeoning list of leading companies aiming to have a ‘net zero’ climate impact. This creates growing demand for products and services – often offered by small or medium-sized enterprises, adding diversification to an investor’s overall portfolio – that can enable these ambitions to become a reality.
An emerging ‘circular economy’
It is encouraging to see this prediction coming to the fore across the Fund’s investment themes. The evolution of the themes themselves are testament to this. For many years a key theme for the Fund was ‘Waste and Recycling’ which reflected the solutions that captured and recycled growing volumes of waste. This theme has since developed into the ‘Circular Economy’ theme to better represent the opportunities in new materials that can avoid, or substitute, harmful waste in the first place. Not only does this expand and diversify the investment universe by sector, but also demonstrates how environmental solutions are developing in clusters, combining to deliver the stretching ambitions for a sustainable economy, and generating hugely positive impact as a result.
A virtuous circle across environmental themes
In other themes, we can see that remarkable successes over recent years have emboldened policy makers to take decisive action on climate change. Clean energy is a case in point: the long-term opportunity for companies in the fund’s ‘Clean Energy’ theme remains compelling, in our view, with a step-change in growth trajectory needed to meet urgent climate and energy-generation goals such as those announced by President Biden. To meet the US’s ambition for a carbon-free power grid in 2035, the annual growth rate of renewable power generation in the US will need to increase four-fold. To a great extent, these targets reflect how quickly the sector as a whole has matured, as policies can now realistically rise to the challenge of avoiding irreversible climate change.
Rather than investing in clean energy companies themselves, however, which on a near-term horizon we feel are quite expensively valued, we have found opportunities elsewhere that are set to benefit from the growth of clean energy. In our ‘Energy Efficiency’ theme for example, investments in grid infrastructure, both ‘in front of the meter’ and ‘behind the meter’ (i.e. in homes and businesses), will be required to help deliver low-carbon energy. So while the fund’s direct allocation to Clean Energy companies is currently at a relatively low 10%, the insights gained from focusing on environmental solutions themes leads the portfolio to a balanced, and changing, thematic allocation.
Dedication to environmental solutions
As a firm, Jupiter’s capability in environmental solutions investing goes back almost to our beginnings (Jupiter was founded in 1985 and the Jupiter Ecology Fund launched in 1988), and my own career history mirrors this too. Since I entered the investment industry in 2009 following an MSc in Environmental Technology, I have only worked in the field of ESG investing, with the bulk of that time on the Jupiter Ecology Fund first as an analyst and now as fund manager. So although I do invest in the fund personally, my commitment to this investment purpose goes beyond that: it’s what I’ve dedicated my career to.
The positive impact that environmental solutions can have, not only for client’s investment returns but also for the planet, makes it a very attractive segment of the investment industry of which to be a part. We have recently been adding to our investment team and the strength of the applicants shows to me that many of the best and brightest are seeking out a career in ESG investment. I believe that only bodes well for the ability of investment managers to navigate these rewarding, complex and sometimes challenging investment themes over the long term.
The value of active minds – independent thinking: A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.
Important Information: This document is intended for investment professionals and is not for the use or benefit of other persons, including retail investors. This document is for informational purposes only and is not investment advice. The views expressed are those of the Fund Manager(s) at the time of writing, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. . The Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. Issued by Jupiter Unit Trust Managers Limited (JUTM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ which is authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM. 27668