Green funds set to enjoy increased investment

By Alice Ross
Published: April 24 2009 19:22

Investors in green investment funds are set to receive a boost from what Alistair Darling called the world’s “first-ever carbon Budget”.
The Budget committed the government to cutting carbon emissions by 34 per cent by 2020. Previous promises to cut emissions have been targets, rather than legally binding.
Fund managers said this would give businesses clear targets for cutting emissions and make growth in renew-able technologies more likely.
Ben Yearsley at Hargreaves Lansdown said the extra investment might mean there were opportunities for investors to make money.
Funds that invest in renewable energy struggled in 2008, with many losing a third of their value as companies in the sector found it difficult to attract funding.
But, with governments around the world channelling money into developing clean technologies, fund managers are hopeful that green investing could flourish again – though they stress it should be seen as a long-term investment.
Simon Webber, manager of the Schroder Climate Change fund, said the measures announced in the Budget were “definitely a step in the right direction”.
Offshore wind will be a particular beneficiary of the extra funding, with £525m channelled towards the expensive technology.
A further £405m will go towards low carbon energy, while £435m will provide extra investment in energy efficiency measures.
Webber has been more positive on wind energy holdings in recent months, adding to his portfolio from the end of December.
“The credit crunch and lack of project financing has really slowed growth in the wind area – we’ve needed a response from governments and that will start to oil the cogs of investment again,” he said.
Charlie Thomas, manager of Jupiter’s £270m Ecology fund, said the wind investment should open up opportunities for wind power holdings such as Vestas.
Industrial gas companies are also set to benefit from the focus on carbon storage.
Webber said the extra funding could be a “great opportunity” for gas handlers such as Linde, the German company.
The Schroder Climate Change fund launched in the UK in September 2007. It has lost 21.5 per cent since then, compared with a 27.6 fall in its benchmark, the MSCI World Index.
Jupiter Ecology has lost 6.5 per cent so far this year and last year lost nearly a quarter of its value.
Thomas said companies in his portfolio including Eaga and Kingspan should benefit from the new energy efficiency funding.
He said governments were showing “unprecedented support” for green investors, making it “an exciting long- term opportunity”.
But an initial note of caution on the Budget proposals was also sounded. Emma Howard Boyd, head of socially responsible investing (SRI) at Jupiter, said: “We need more details on how the carbon budgets will work to fully assess the opportunities they will present for green investment.”
Other specialist investors are set to get a boost from changes to venture capital schemes announced in this week’s Budget.
People who put money into an enterprise investment scheme (EIS) – a direct investment into an unquoted company – will be allowed to “carry back” more of their tax relief to the previous tax year.
They will now be able to claim the tax relief of 20 per cent allowed for an EIS investment – on investments up to £500,000 – for the previous tax year the investment is made.
The changes could benefit people earning nothing in the current tax year – for example those who have retired or are not taking an income from their business, according to Paula Higgleton at Deloitte.
Copyright The Financial Times Limited 2009