Jupiter Gr. Regulatory News (JGC)

Jupiter Green (JGC)

09/12/2022

Results analysis from Kepler Trust Intelligence

For the six months to 30/09/2022 Jupiter Green delivered a NAV total return of -9.3% and a share price total return of -8.3%. This is in comparison to the MSCI World Small Cap benchmark, which produced a total return of -7.5%. However, the trust's focus on environmental solutions means there are significant differences in industry and geographic allocations to the benchmark.

The reporting period has seen the impact of the war in Ukraine have a material impact on several themes in the portfolio, as have wider macro-economic factors such as inflation. This in turn has affected the market's view on share price valuations which has put JGC's NAV under pressure.

In the period, the trust has widened to a significant discount, averaging at 15% but troughing at 23%. The board have looked to support the rating through buybacks, repurchasing £0.2m shares in the period.

Chairman Michel Naylor highlights the better market and policy backdrop for the trust, "The attention of global investors and policymakers continues to focus on the war in Ukraine, its impacts on the global supply of energy, commodities and food and the inflationary consequences borne by business and consumers. The need for environmental solutions to solve the globe's climate and ecological challenges appears more pressing than ever."

Kepler View

Jupiter Green (JGC) has a relatively flexible mandate to invest in companies of all sizes which are providing solutions to environmental challenges such as climate change. This is an area expected to have strong structural growth trends and JGC aims to capture them through six environmental themes designed to identify the key opportunities. These companies will be at various stages of development, which Jon Wallace defines as innovators, accelerators and established leaders. The size of the trust offers Jon the flexibility to invest in the best opportunities in the smaller-cap space from across the globe which competitors often have to overlook.

The past six months have seen considerable news flow. Inflation has continued its upwards push, driven mainly by an energy price spike as a result of the war in Ukraine. This has led to heightened interest rate expectations which has itself led to a devaluation of JGC's 'innovator' stocks, which are typically more growth orientated companies. As such, valuations on both the underlying portfolio and the trust itself have been under pressure.

However, many of the portfolio's holdings have enjoyed a boost in their prospects, particularly the clean energy and green buildings (which focuses on energy efficiency) themes. We think this disconnect has arguably opened up a valuation opportunity.

Changes in government policy in the period have also been supportive to the strategy. The US have passed the long-awaited Inflation Reduction Act (IRA) which contains support for renewable energy. This change now aligns government support, regulatory change and consumer behaviour behind the push for renewable energy which could drive growth in the long-term.

While the period has seen a negative impact on share prices of companies providing environmental solutions due to macroeconomic factors, we think the urgency of tackling climate change and the commitment of governments has only increased. In our view this has led to a disconnect between the improved underlying story and the negative market narrative, and potentially created a value opportunity.

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