It may come as a surprise that Jupiter’s Ecology fund has an allocation to diesel. And you would be forgiven for thinking investment in the burning of fossil fuels sounds the antithesis of what an ecological fund should be doing.
Jupiter’s argument is it is better than the alternative: the new generation of diesel engines will be cleaner than petrol equivalents. More diesel equals less petrol emissions, it says.
Charlie Thomas (pictured), head of strategy and sustainability at Jupiter, was speaking at Citywire’s South East event. He has worked on Jupiter’s sustainable funds suite for over 18 years. ‘When I started, I was the green-y in the corner,’ he said. But since then he said he has seen ‘exponential growth’.
‘We’re spending a lot of time looking at companies that aren’t involved in the 25% of the market looking at electric vehicles but are involved in the 75% of the market focused on internal combustion engines,’ said Thomas.
The fund’s average holding period is between six and seven years.
Over three years, the Ecology fund has returned 25.4%, lagging the sector average of 43.2%. Top holdings in the fund include US water technology company, Xylem, and Republic Services, a waste collection company.
Money in laundering
Thomas said middle-class growth in economies such as India and China has created a great investment opportunity. He suggested future growth in the Ecology fund would come from Asia, after predominantly concentrating on Europe and the US over the past three decades.
‘By 2030, Asia could represent two-thirds of the global middle class population’, he said.
Thomas used the example of the growing Indian middle class buying washing machines, which he noted would ‘increase their water consumption by 400%’. Thomas said this created a significant opportunity in water technology, both in terms of the demand for clean water and the disposal of dirty water.
The growing demand for aviation is also a key focus for Jupiter, with Thomas noting only 8% of Chinese people have been on a plane, and that demand is set to grow exponentially. He noted the investment potential from a sustainability perspective was for planes to become more fuel efficient, to mitigate the environmental burden.
Another surprise, perhaps, was the manager’s scepticism about electric vehicles. Thomas does not hold Tesla shares in the Ecology fund, nor is he investing in battery technology as he feels that the margins are too low.
Instead, Thomas is backing power chip manufacturers, as he believes there is a high growth potential with little competition for the companies producing the technology.