Fund Size: £1.90m

Total screened & themed / SRI assets: £2070.00

Total assets under management: £2070.00

As at: 30/04/24

Contact: apickard@ecofininvest.com

Overview

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Policy

Ecofin’s Sustainable Listed Infrastructure (SLI) strategy invests in companies whose core assets respond to essential needs, operate within solid regulatory frameworks, and have predictable and sustainable cash flows. These include electric and gas utilities and renewable energies, environmental services, and transportation infrastructure. The businesses we select for our portfolios are growing as they invest to accomplish vital infrastructure upgrades and sustainability objectives. We leverage our expertise as sector-specialists to identify companies transitioning from legacy structures to cleaner business models in the early stages of their transformation, in order to capture the full value creation associated with it.

We attempt to identify and invest in the infrastructure supporting growth and sustainability objectives, and do so through three main sustainable investment themes:

Electrification: The power sector is undergoing a profound transformation driven by the decarbonization and electrification of energy demand. Utilities are at the forefront of this multidecade transition. By adapting and, in many cases, substantially overhauling their business models to accommodate new greener technologies and decentralized power sources, utilities are bound to be major beneficiaries of secular growth and attractive returns on significant capital investments.

Environmental Services: Companies involved in the abstraction, treatment and supply of water and the treatment of waste-water, and the provision of environmental services such as recycling and waste management. These businesses are critical to the conservation of energy and water resources and an overall reduction in waste and emissions.

Transportation Infrastructure: Transportation infrastructure and services are essential to developed societies and economic growth. These business models have growth potential due to the urgent need to build out and/or replace outdated infrastructure to accommodate economic growth and to modernize infrastructure to cope with the energy transition. This includes the buildout of electric vehicle charging infrastructure along toll roads, the upgrading of refueling infrastructure to accommodate sustainable aviation fuels and potentially hydrogen at airports, and the repurposing of land area adjacent to the infrastructure for sustainable uses such as the production of renewable energy or afforestation. According to most calculations, the annual level of global infrastructure investment must increase two-fold by 2035 to keep pace with projected GDP growth, the disruption caused by the energy transition and the adoption of renewables, and to meet the UN’s SDGs.

In partnership with CarbonAnalytics, and regarding the Scope 1 emissions of the asset-backed infrastructure sub-universe, the team updates a global proprietary database of power generation companies with detailed CO2 emissions by source of power and by company.  This is compared to the respective power grids in which each company’s assets are operating to arrive at a ‘net improvement’ position for all of these exposures, which is important because the utilities industry has the highest carbon emission intensity (per $ revenue) of any specific industry group. We warehouse this power generation emissions data for a period of time to monitor portfolio emissions trends and utilise these to define our investment universe.

Additionally, the investment team utilizes a proprietary data and reporting framework that was developed in-house, which collects and summarizes a combination of datapoints, scores, and controversies on public companies using data obtained from third-party ESG data providers and other internal and external sources. This framework is known as the Ecofin Sustainability Monitor (the “ESM ”).

We also have a series of specific ESG and sustainability quantitative screens:

• Besides the power generation emission data from CarbonAnalytics, we conduct analysis internally on Scope 1, 2 and 3 emissions and calculate the portfolio’s carbon footprint including financed emissions and carbon intensity.
• We monitor revenue and CAPEX exposure to the investment themes.
• We track companies’ Net Zero and more general emissions reduction targets
• The fund is committed to a minimum portion of investments to be sustainable investments as defined by the Sub-Investment Manager’s proprietary methodology that identifies sustainable investments based on contribution to UN SDGs. Details can be found in our strategy level Sustainability and Impact report.

We believe our strategy is positively contributing towards a more sustainable future by aligning with UN Sustainable Development Goals 3,6,7,8,9,11,12,13 and 14.

Process

At the idea generation stage, both qualitative and quantitative methods incorporating ESG factors are adopted. To define our investment universe, we include ESG criteria such as revenue exposure to strategy themes and fossil fuel exposure thresholds. In the subsequent investment due diligence process, the team conducts sustainability analysis. We obtain sustainability data from different sources including companies’ management team and third-party data sources.

The investment process comprises an assessment of macroeconomic and regulatory factors relevant to the sectors but it concentrates first and foremost on grass-roots fundamental analysis of companies. The team utilises a four-pronged research approach which includes qualitative, quantitative, relative value analyses and carbon analysis. For each company the team considers a host of non-financial data points and examines supplementary disclosures and materials around sustainability or ESG issues issued by the company or by a review agency. This ESG analysis is then considered along with other quantitative and qualitative factors to create a composite qualitative picture of a company.

We typically employ the below analyses to arrive at investment decisions: 

• Qualitative analysis: The team uses proprietary risk models to assess a company’s asset quality, management, stability of cash flows and ESG factors
• Quantitative analysis: The team employs proprietary financial models to understand growth prospects, liquidity position and sensitivities to key drivers
• Relative value analysis: Valuation models and equity market indicators guide portfolio weightings; screening tables allow the investment team to compare companies and stocks according to different criteria (for example, regulatory risk profile, valuation metrics, ESG scores, historical valuation ranges)
• Carbon analysis: in partnership with a third-party provider, the team updates a global proprietary database of power generation companies with detailed CO2 emissions by source of power and by company

Sustainability risk analysis is also a part of stock assessment to identify ESG risks, or potential risks, of investments to ascertain the nature of the sustainability risk, as well as its materiality. This process seeks to assess how ESG risks can derail or materially impact the underlying investment case of a company. The team integrates sustainability risks into its investment decision making process both at the initial due diligence stage and as part of its ongoing risk management.

To evaluate the ESG credentials of companies, we collect different types of data from various resources, direct and indirect. 

• Third party sustainability data providers: MSCI and Bloomberg. We obtain raw sustainability related data, such as emissions data and climate targets, to conduct subsequent in-house analysis with our own analytics tools.
• Sell-side research: the Sustainable Investment Strategist interacts with ESG teams from different organizations on investment mega trends, regulations and stock specific ESG analysis. The investment team also receives and reads research papers on similar topics.
• Proprietary data: we work with CarbonAnalytics on a contracted basis to maintain our proprietary generators database. We warehouse power generation emissions data for a period of time to monitor portfolio emissions trends and utilise these to define our investment universe.
• Investee companies: we collect data from companies’ sustainability reports, other filings and websites. We may also directly engage the companies’ management teams to encourage them to disclosure relevant sustainability data.
• Other third-party resources: we collect data from different sources including SBTi, IEA, CDP and so on.

Resources, Affiliations & Corporate Strategies

Each company is assigned a Lead Analyst who is responsible for all aspects of the research process and for engaging with company management both before investment and on an ongoing basis.  The Lead Analyst and the Sustainability Strategist identify the E, S and G risks or potential risks to ascertain the nature of the risk as well as its materiality and monitor them throughout the holding period, with support from the SRI team. The primary aim of this process is to assess how each risk can derail the underlying investment case of a company.  As part of this process, the SRI team provides external data tools in addition to our internal ESM system to assist our analysts in this review. No part of the decision-making process is outsourced to an external entity or individual.

The Sustainable Investment Strategist (the “Strategist”), who sits on the investment team, is responsible for sustainability and ESG analysis within the investment process. The Strategist reviews sustainability and ESG attributes of each public company prior to inclusion in a portfolio and implements the policies developed and maintained by the SRI team. The Strategist also leads sustainability-related engagement efforts with companies.

Additionally, the investment team is supported by a dedicated sustainability and ESG team referred to as the Sustainability & Responsible Investing (“SRI”) Team. The SRI team is responsible for the firm’s sustainability and ESG policies and procedures, regulatory and governance framework, impact reporting, and other strategic initiatives. The SRI team supports data, reporting, and training needs, assists with the implementation of the Sustainability & Impact Policy, and collaborates with peers through global initiatives like UN PRI, Net Zero Asset Managers initiative, and the GIIN. Additionally, the SRI team works closely with the investment teams to integrate firm policies within the investment process.

The firm’s Sustainability & Impact Committee (the “Committee”) is responsible for oversight of the firm’s sustainability and ESG framework. The Committee provides governance to comply with evolving global regulatory frameworks such as the EU Sustainable Finance Disclosure Regulation (“SFDR”) and works with the SRI team to align policies with the firm’s strategic values. The Committee includes representatives from Ecofin’s executive leadership team, compliance team, and investment team, among others, to ensure consistent implementation of policies and initiatives across the firm. The Committee meets at least quarterly.

While we rely heavily on proprietary research prepared in-house by the investment team and the Sustainability & Responsible Investing Team, we also utilise data provided by third parties as well as a wide array of sell-side research primarily used to compare expectations as well as to get timely news.

Important third-party research sources include Bloomberg New Energy Finance (BNEF), CarbonAnalytics, MSCI and Sustainalytics. BNEF’s data is helpful and important for the team’s understanding of sector and regulatory issues and allows it to identify discrepancies between BNEF, proprietary and sell-side research forecasts/models. Besides interaction with sell-side research sector analysts on fundamental analysis, our Sustainable Investment Strategist may interact with sell-side sustainability teams for updates on market trends and sustainability investment themes.

The investment team utilises Bloomberg, MSCI, and Sustainalytics data to complement the team’s proprietary environmental, social and governance (“ESG”) assessments, with the goal of leveraging MSCI’s thorough ESG review for each company entering into the portfolio and broad coverage. The MSCI service is a helpful tool to assist the investment team in quickly identifying focus areas for each company’s E, S, and G assessments. Sustainalytics helps us to identify controversies in different areas and the ongoing monitoring of such.

In addition to qualitative research, the investment team utilizes a proprietary data and reporting framework that was developed in-house, which collects and summarizes a combination of datapoints, scores, and controversies on public companies using data obtained from third-party ESG data providers and other internal and external sources. This framework is known as the Ecofin Sustainability Monitor (the “ESM ”).

Ecofin’s parent company and/or its affiliates are signatory to or involved in the following ESG related organizations: United Principles for Responsible Investment, Ceres, CDP, TCFD, Net Zero Asset Management Initiatives, GIIN, Climate Action 100+ among others.

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

… investing globally in growth-oriented economic infrastructure companies which are committed to the energy transition and have fundamentally strong ESG credentials.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by…

…supporting a rapid transition to a low-carbon economy and being a proud signatory of the Net Zero Asset Managers initiative.  

Literature

• Fund Factsheet
• Sustainability & Impact Reports
• Fund Overview & Literature

Last amended: 11/08/24 01:08