Water
Pipelines
Towers
Transmission
Airports
Ports
Exchanges
Data centres
Hospitals
Payments
Waste
Natural gas
Satellites
Optical networks
Electricity
Renewables: NextEra
Among the core holdings in the M&G Global Listed Infrastructure Fund is NextEra Energy a company at the vanguard of renewable energy deployments. The critical nature of the underlying assets epitomises the attractions of infrastructure as an asset class, while the structural growth
in renewables provides a powerful long-term tailwind for companies addressing climate change.
The value and income from the fund’s assets will go down
as well as up. This will cause the value of your investment
to fall as well as rise. There is no guarantee that the fund
will achieve its objective and you may get back less than
you originally invested.
NextEra Energy is a US utility company which ranks as the world’s largest producer of wind and solar energy. With a broad geographic footprint across the US, NextEra Energy
is the nation’s leading provider of clean energy including
natural gas, a key transition fuel for the reduction of carbon emissions. It is also a market leader in energy storage, with more capacity than any other company in the US, to improve the efficiency of energy use.
Sustainability is at the core of the company’s strategy to benefit a broad range of stakeholders: the environment, by way of its focus on clean sources of energy; customers, by way of a reliable service and lower costs; and shareholders, by way of consistently rising cashflows and dividends. We invested in NextEra Energy at the fund’s launch in October 2017 and since then the company has produced higher dividends and a higher share price.
Investing in the road to zero carbon
Engaging with renewable energy champions on both sides of the Atlantic
Past performance is not a guide to future performance.
The value and income from the fund’s assets will go down
as well as up. This will cause the value of your investment
to fall as well as rise. There is no guarantee that the fund
will achieve its objective and you may get back less than
you originally invested.
The fund can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.
The fund holds a small number of investments, and therefore a fall in the value of a single investment may have a greater impact than if it held a larger number of investments.
Investing in emerging markets involves a greater risk of
loss due to greater political, tax, economic, foreign exchange, liquidity and regulatory risks, among other factors. There
may be difficulties in buying, selling, safekeeping or valuing investments in such countries.
Further details of the risks that apply to the fund can be found in the fund's Key Investor Information Document and Prospectus.
The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.
Decarbonisation: Enel
Enel, the Italian utility and another company at the vanguard of renewable energy deployments shares the philosophy of sustainable growth. Enel is a domestic champion but also a global company with a significant presence in the long-term growth markets of South America. Enel’s strategy combines significant and growing investment in renewables with an acceleration in decarbonisation. The company is planning to triple renewables capacity by 2030, with wind and solar power expected to account for 80% of total capacity by the end of the decade. Coal is expected to be phased out completely by 2027.
Enabling the development of electric mobility is another key initiative, with Enel embarking upon the single largest deployment of charging stations in Europe. The company is proposing to quadruple the number of charging stations across the group over the next three years, from 186,000 at the end of 2020 to 780,000 in 2023.
Enel also has a clear commitment to returning cash to shareholders. The company’s guidance for dividend growth over the next three years is at least 7% per annum.
We invested in Enel in June 2018 when concerns about the political and fiscal situation in Italy led to indiscriminate selling in the Italian stock market, particularly in the more interest-rate sensitive sectors. Enel’s business is not confined to the domestic market and we saw the sentiment-driven weakness as a buying opportunity. The stock was purchased on a historic yield of more than 5% with the potential for robust and reliable growth in the dividend stream.
Past performance is not a guide to future performance.
The value and income from the fund’s assets will go down
as well as up. This will cause the value of your investment
to fall as well as rise. There is no guarantee that the fund
will achieve its objective and you may get back less than
you originally invested.
The fund can be exposed to different currencies. Movements in currency exchange rates may adversely affect the value of your investment.
The fund holds a small number of investments, and therefore a fall in the value of a single investment may have a greater impact than if it held a larger number of investments.
Investing in emerging markets involves a greater risk of loss due to greater political, tax, economic, foreign exchange, liquidity and regulatory risks, among other factors. There may be difficulties in buying, selling, safekeeping or valuing investments in such countries.
Further details of the risks that apply to the fund can be found in the fund's Key Investor Information Document and Prospectus.
The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.
Fuels for the future: Hydrogen
One of the most exciting opportunities on the path to net zero and de-carbonising electricity generation is hydrogen, or more specifically green hydrogen. A future fuel that is here with us today and the cleanest burning fuel that has yet been discovered, hydrogen is present everywhere as it is the most abundant element in the universe. Most importantly for the goal of reducing carbon emissions, when hydrogen combusts, or burns, the only by-product it emits is water.
Currently, 30% of greenhouse gas-producing activities,
such as aviation, shipping, heavy goods vehicles, and the manufacture of steel, cement and chemicals, cannot be economically electrified.* Because of this, we need a substitute for oil and gas that has the interchangeability and transportability of those materials, but isn’t as costly or as heavy as batteries, and green hydrogen looks to be where both policymakers and industry are settling.
Traditionally, hydrogen has been created using fossil fuels to split it from natural gas, which releases large amounts of carbon dioxide into the atmosphere and contributes to climate change. However, so-called green hydrogen is produced using renewable electricity generated by wind turbines and solar panels, for example, to power electrolysers that split water into hydrogen and oxygen.
*Energy Transitions Commission report.
Renewables
This development has created an opportunity for the utility sector in particular, as renewable energy deployments with excess power generation can be used to produce green hydrogen. It needs to be transported and stored (either in liquid form or in a fuel cell), and we believe the existing natural gas infrastructure in various countries around the world can be repurposed and re-engineered to accommodate hydrogen, not just in the existing natural gas stream, but ultimately on its own.
This has both residential and industrial applications, and although the technology is in its infancy and not economic to scale currently, it represents a promising climate solution. Already, companies are investing in hydrogen production and trialling the use of the element within the natural gas stream.
We see significant opportunities in the future in our investment process for this fuel of the future.
The value of a fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested. The views expressed in this document should not be taken as a recommendation, advice or forecast.
