Darius McDermott, managing director, Chelsea Financial Services
We’re looking at potentially increasing our exposure to climate strategies. Amid a value rotation triggered by inflation and climbing interest rates, climate strategies have taken a beating, and the financial challenges faced by established renewables companies like Orsted and Siemens Energy have soured sentiment further.
However, in the long term, this theme remains resilient, and we see an opportune moment to increase our allocation at a time when valuations look compelling.
We are finding promising opportunities in the renewables trust space. Share prices have been volatile, with many trusts shifting from double-digit premiums to double-digit discounts in less than two years. However, the fundamentals remain strong, with cash flows and dividends steadily increasing.
Biodiversity funds are also an interesting new area. While the potential is promising, we acknowledge the investment case requires further validation, and there is room for strengthening the link between the theme and underlying portfolios. Recognising the complexities, we remain vigilant for compelling opportunities in this space.
I would also like to see more strategies move beyond simple divestment, especially given there is very little evidence this process creates real-world impact. In some cases it may even be harmful, such as when external pressure prompts companies to sell harmful assets to others, like coal.
Funds such as the Redwheel UK Climate Engagement Fund, which embrace active engagement and seek to influence corporate behaviour, are a step in the right direction. I would like to see more impact strategies investing in disruptive change and attempting to alter the status quo rather than funds which simply perpetuate it.