Fund feature: Jupiter Ecology

Tyndall Partnerships

Subject: Jupiter Ecology / Veolia Group

The Jupiter Ecology Fund is a fund that we own across the models.

Jupiter Ecology is, in many ways, the godfather of ESG investing. It was the first authorised green unit trust to be launched in the UK in 1988, and what makes it stand out from the crowd is that it adopts a valuation matters approach to sustainable investing. It is a fund that is cognizant of benchmark but equally so not afraid to step back from the highly rated stocks that trade more on price momentum and speculation than they do earnings.

The fund’s approach is to invest in themes that are related to sustainability, for example clean energy and sustainable agriculture, so by default it adopts something of a growth bias and offers terrific long term growth potential from structural tailwinds.

Around half the portfolio is exposed to what they call ‘Accelerators’; companies that have proven and scalable solutions, where projected sales growth is above GDP paired with commensurate earnings growth and free cash flow generation. This provides dynamism to the portfolio, complementing the inclusion of more mature businesses categorized as ‘Established Leaders’.

In all, it is a very exciting portfolio that straddles both growth and sustainable genres, offering performance potential paired with diversification of theme that is hard to replicate elsewhere.

We thought it would be worthwhile taking a closer look at one of their larger holdings.

Veolia group “aims to be the benchmark company for ecological transformation” according to their own website.

What does this actually mean? Well, they design and provide solutions for water, waste and energy management. In 2020 they supplied 95 million people with fresh drinking water, 62 million people with wastewater services, and produced 43 million megawatt hours of energy and treated 47 million metric tons of waste. These activities helped the business, that employs nearly 180,000 worldwide, generate over £24 billion of revenue in 2021.

Zooming in on ‘waste management’, one very topical subject is the electric car market that has excelled in recent years, yet the composition of electric cars is problematic as the batteries contain pollutants. Each battery weighs an average 300kg and contains plastics, solvents, and scarce metals such as copper, cobalt, nickel, lithium and manganese. All may present risks to the environment and humans.

An EU Directive introduced in 2006 requires 50% of the battery weight to be recycled. Through a subsidiary business, Veolia handles more than 6,000 tonnes of batteries and recycles up to 80% of them. Recycling the carbon to make tyres, lubricants, and additives, whilst the metals are recovered and resold.

The company opened its first UK battery recycling centre in the West Midlands earlier this year and by 2024 will have the capacity to process 20% of the UKs end of life vehicle batteries. The plant will initially discharge and dismantle batteries before the mechanical and chemical separation recycling processes will be completed.

Batteries will be increasingly necessary as we transition to a greener economy, and therefore, the necessity to recycle them efficiently will also increase. Veolia is well placed to capture this growth.

17th June 2022
Read time : 4  mins

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Data source (unless otherwise stated): Bloomberg
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