Supply in renewables not living up to investor demand
Hurdles to renewable investments are not on the consumer side, but on the production side, as political opposition and financial capital have not improved market supply, according to Redpoint Investment Management.
Ganesh Suntharam, Redpoint chief investment officer, said retail consumers were becoming more aware of their environmental footprint and would be more inclined to act if given greater choice in their sources of energy.
“The hurdles really come from the production side and are twofold: politically, there has been a reluctance to embrace new forms of energy given its potential impact on Australia’s coal assets and exports,” Suntharam said.
“Despite healthy scientific debate on this topic, the end message to industry is that a change to renewable infrastructure will not be supported by co-ordinated fiscal policy which subsequently leads to the second hurdle.”
Suntharam said the second hurdle was that renewable projects required a significant upfront capital spend given the greenfield/brownfield nature of some of these projects.
“This can be prohibitive for smaller companies with limited balance sheet and even for some larger listed companies where shareholders are not aligned to a longer dated capital-return payoff these projects attract,” Suntharam said.
However, from an investor’s perspective there was a much greater opportunity set for investing in listed and unlisted renewable assets today than there was three to five years ago.
“This is particularly the case when you look to offshore markets like Europe where there are some well-developed renewable infrastructure assets” Suntharam said.
“In some cases, the companies that own these assets have made it their sole purpose to provide renewable energy making them very effective pure-play investments.”
Max Cappetta, Redpoint chief executive and senior portfolio manager, said there’s no conversation they would have with an existing or prospective investor that did not touch on sustainability.
“One key element is the way in which the carbon footprint of the portfolio is evolving, particularly when you look at exposure to utilities and transportation companies,” Capetta said.
“The other aspect is to look at those companies which are focused on renewable energy sources and so bringing some of those into the portfolio.
“We’re still remaining in that transition phase, there’s still a range of uncertainty particularly on the regulatory side and carbon pricing that still needs to be played out over time.”
According to FE Analytics, the Redpoint Global Infrastructure fund lost 12.01% over the 12 months to 31 October, 2020.
Within the Australian core strategies universe, the infrastructure sector lost an average of 11.31% while the fund’s benchmark lost 10.46%.
Performance of the Redpoint Global Infrastructure fund over 12 months to 31 October 2020
AUTHOR
Chris Dastoor
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
